I've never finished a complete RPG but, I did this pretty easily using a scripting language.

Basically, I had scripts for each entity in my game that would get triggered when something would happen in game. For example, I had a "near" script. Whenever I got near something, their near script would get run. The near script could check stuff to see what the entity should do (if anything). I also had an stl map for each entity that represented their memory.