In some cases but coming from someone who played MUDs back in the day on a monochrome display and dial-up I know I would have been very interested in playing one with NPCs powered by an LLM had they been available back then. The NPCs as they existed were generally just furniture and the interesting part was playing with and talking to other people.

That sounds very different than my memory of MUDs. The ones I remember were much more a text-based version of "World of Warcraft" or other similar MMOs where you navigate through a world, complete quests, etc. You could chat with other players but it was more about teaming up for quests than a creative writing/roleplaying exercise.

Not to say that what you're describing didn't exist, but I don't think it was defining feature of all MUDs.

Most people played MUDs for the grind. Levels and loot. They care about the story as much as you care about it in Path of Exile.