Here's an example of how terrible this is in real time, a scenario in which I want to talk to Mayrina with my main character and the female gnome afterwards. But instead;
Mayrina ignores my main character standing right next to her and instead talks to Lae'zel
The female gnome instead of talking to Shadowheart (who can be seen on the minimap standing right next to her), instead pulls my main character into a conversation from way over there
Just by playing the game, it becomes obvious that when it comes to dialogue proximity, there is a clear 2m radius that makes an NPC ignore any party member within it and instead initiate dialogue with the closest companion outside of that radius. I wish this proximity dialogue would be severely reduced and optimized so these things don't happen.
The second worst offender is Nadira, the Soul Coin tiefling, who will do the same thing and talk to anyone except the main character.