First we start with an absolutely huge cache of words, phrases, and paragraphs.
Soo, the AI would need to "find it's way" through this ?
It would come closer to how humans think then most algorithms, so +1 for that,
I see however two problems:
1) It would take a real big database, probably something like a 20-dimensions big matrix.
2) Without action tied to the conversation, it'd be just another cleverbot.
@Onigiri Flash:Awesome vid.