Thank you all for replying.
The STT will be limited to conversation only. My plan is to have conventional dialog options like in most games but give the player a "textbox" to type in simple sentences. This textbox can alternatively be filled in with the STT output. Once the player gives the command to "say" the sentence (or a specific time passes without input), the entire string will be sent to the parser/thesaurus function to create a string of key words that will then be interpreted by the NPC's conversation function and decide on the appropriate response.
As far as the NPC-party conversations while traveling-- That's going to be a big part of the game. Travel times will be on the magnitude of minutes to hours.
I just realized some of you may not know what type of game I'm working on. It's a space simulation RPG. It will have no "loading" screens and each star system will be generated on-the-fly while traveling to it. The RPG aspect will be first person shooter-like.
With that out of the way..... Certain NPCs will have hidden Easter Eggs that you can discover by listening to their conversations with other NPCs/your character and then asking them about it. These Easter Eggs won't be part of the normal conversation menu, so it's not like you can just click every option to get what you want.
The interface will also allow the player to still move around and interact with objects while still in conversation with a NPC-- A hot-key toggle will change from "I want to talk" and "I want to move". This will allow the player to effectively talk and chew gum at (nearly) the same time.
About "mistranslation":
I understand that even the best STTs out there have trouble sometimes getting what you say correctly. That's why I want to show the text in the textbox as you say it. This way you can see if there's an error and clear it so you can start over, perhaps saying it differently. I have played with Windows Speech Recognition (Win7) and it seems to be fine as long as I don't talk too fast. It took a while for it to "learn" my vocal patterns, but once it did, it seemed to work just fine. I want to use this in my game, but I don't know how to access it in my program.....