Hi there,
Although I'm a noob in music, here are my 2 cents.
For my goofy point&click adventure game Argh! Earthlings! I have searched for background music for at least 3 month. I had needed around 20 comic style songs for trailer, intro, ending sequence and the game itself. Most of the songs are about 2 to 3 minutes long and are loops actually. I used pond5.com to get all of these. The music is including funky country style, calm mysterious style and some cold/digital laboratory style. Here and there is some stressful action music. The songs change fading out and in within a second, every time the scenery changes (if necessary). The transition is done programatically. To get a little bit more variance into this I tried to randomize the offset of the beginning. It sounds a litte bit like if one would stack or cascade the sceneries.
The only thing that would be nice to have is to stop a song at a specific time and it change for more action. On the other side sometimes I would need a longer silence to underline specific game details. Im pretty sure this all can be done by code. I think this is what you try to do.
So, for this type of game a dynamic, algorithmically developing music is nice, but somewhat too much work (for me). For some RPG this would be a cool feature, and for titles like Skyrim it is a must have, I think.
Hope this helps you a little bit.