Gamasutra has a fun essay up from Ben Schneider, formerly of Iron Lore Entertainment and currently narrative designer at Big Huge Games, on dialogue in games — and the challenges of getting it right. Schneider isn't calling for a removal of longer dialogues, but pointing out that short dialogue can function better than its longer cousin in many situations: creating ambiance in the background or delivering information (without interrupting or hindering gameplay) when in the forefront. Short dialogue should be like poetry, and poetry is 'a powerful thing':
The key, of course, is to keep dialog short where it counts. And the hard part is in knowing when that is. Dialog that's in the environment, tied to gameplay mechanics, or that plays during game action really needs to stay short, clear, and direct. But that is never an excuse for lower standards of writing.
Very short dialog (under six seconds, averaging two) is critical for information that needs to be digested instantaneously. Merely short dialog (let's say as long as 15 seconds, but averaging closer to eight) has the flexibility of carrying a lot more information and character, but can't reliably be used while the player is fully engaged in intense, focused play.
Obviously, the pressure is off when you've got the player's attention and they are largely passive, such as in cinematics, dialog trees, and when they can safely listen to narration over their current task — that is, for untimed puzzles and nonverbal, visually centered challenges (as in Portal, for example). Still — I would argue that there are precious few cases where a single line of dialog should run over 20 or so seconds.
He pulls out some good examples of what works and what doesn't in many situations, and it's a nice meditation on the role of those short little snips in games — pretty necessary, but pretty hard to get right at times (pedantic prose is, after all, easier to write than compelling poetry).