We worked more on the collision, this time adding in what was needed for the NPCs and creatures. They can now follow the player into a building or cave. This also allowed us to put some of the quest NPCs in their houses.
Next came line of sight. You'll need line of sight to cast certain spells and abilities, like fireball, frost bolt and raise dead at the moment. Creatures need line of sight to get aggro on you.
And lastly the creatures have path finding, running around corners to get you. They won't follow you indefinitely and it is possible, with some manoeuvring, to lose the creature following you.