I'd much rather have cities and towns with hundreds of NPCs than the ones in Skyrim with 20. With larger cities, you can still have those 20 NPCs all with unique quests, among the other NPCs. If anything it would make searching for them a game play mechanic in its own right.
DO NOT TRY ARGUING WITH ME I DO NOT CARE - FUCK OFF.
I think the future of NPC design is something that returns to Daggerfall-style cities and towns with a robust procedural element - but then also applying Dwarf Fortress-like needs and schedules to the simulated people. Half the fun people have in Skyrim is emergent gameplay from messing around with the townsfolk, imagine how many more things you could do if each one had a dozen more methods of interaction.
They had the radiant AI thing with oblivion, or whatever it was called. I don't remember if they kept it with Skyrim.
Yeah what I'm thinking of is a more advanced version of that. AFAIK Skyrim NPCs just have a schedule that tells them where to walk and hang out at different times of day, enough to give the illusion of a living world to someone sprinting through collecting quests but not much else.