What you describe is pretty much the first half of Lionheart, which was up to that point the best single-character RPG ever. Then it broke my heart by turning into one long slugfest for the entire second half.
From what I understand, Black Isle had to hurry up and finish it as they were being wound up, but as long as you are in or based around New Barcelona the kind of options you have for your character are second to none. In every encounter you can talk to you have options based on race, stats, abilities, and hosts of other things.
Yeah, there's fighting in the first half too, but it's in no way the main focus of the game.