Have been trying (for two weeks) to make an NPC that will locate and start up a dialogue with the player upon entering a town. The NCP will offer to buy sell contraband items or offer the player a contract to deliver contraband items to another shady NCP in another town for x amount of cats. I have tried basing this on certain gate guards an caravan leaders, but have had no success. Have also tried creating AI packages, but again nothing worked. Does anyone have a solution to this? Thanks in advance.

Setting up actual quests in this game is quite complicated it seems. There doesn't appear to be an existing framework to make basic quest interactions work.

I was able to add custom unique characters to the world with dialogue and offer to join party for payment, but that was about the extent of it.

I think the best you could do is just set it up so that you find and speak to NPC who gives you directions to another NPC, possibly demanding a certain item or payment for the info. Then just set up NPC2 as a vendor with dialogue in reference to the first as well as character specific vendor directives to pay a certain price for goods.