There's only so much that can be done with AI run on a cpu, but at least they can do some decent animations. In Rage you run up behind a guy and he looks at you and says, "Oh, Sh*t!" The characters dance around in different ways and their megatextures make them look more realistic. I can't wait to see what ray cast geometry does for them.
Characters, plots, dialogue, etc. have always been id's weak point. Run down the hallway, shoot the monster, rinse and repeat. Adding more animations and textures helps to break up the tedium a bit. Those are exactly the kinds of little details I was hoping to see in the game and I haven't been disappointed, although the quest dialogues needed more humor in my opinion.