I don't follow the IF world closely (though I often want to set aside the time to get into it), but surely they are also heavily focused on the prose too?
If you treat the text as just an interface to get to the underlying formal game mechanics, then sure, IF is just simple puzzles because there's no hand-eye coordination going on.
But if you treat the text as a fundamental part of the experience, then the puzzles are only a small piece.
By analogy, films are the world's shittiest games because — even though the graphics are nice – the gameplay is obviously pretty meager. The player doesn't get to make any choices at all! But with a film, the graphics are the point.
The one benefit of text games over other types of games is that you can essentially implement whatever world you want, without a trillion Dollar budget for graphics and sounds effects. A holo-deck powered by imagination.
Speaking of games in holo-decks... The killer-app for AI-powered IF may be erotic fiction.
The point about AI in IF would be to break that mold. Dialogs can be more challenging, for example you could make a game about interrogating people. Or you could tell NPCs to do certain stuff for you. Or these NPCs could have some advanced planning or decision making.
To make IF more interesting, especially for those outside a very narrow niche, you would need them to be a lot easier to navigate, and offer more challenges that don't look like puzzles and don't hit you with a brain-twister at every turn.