There have been occasions when I have entrusted the role of NPCs into the hands of some players. In many cases it didn't pan out as intended while in others it made for very memorable and fun events.
It wouldn't be fair to blame players for not fully embracing that role and playing it to the hilt. For some people, it just doesn't match their style of play.
For those that do embrace the opportunities presented, the game gains immensely from the depth of interaction and the directions it can lead.
A couple of examples from campaigns of mine past:
The game was second edition D&D, and the first level characters had become entangled from instant 1 of the campaign in a chase to catch a thief that had stolen a very important item. The chase had led them through part of two kingdoms into wilderness, on into the territory of at least nine goblin tribes and the nearby homes of several other types of humanoids.
At first they didn't understand why they seemed to be chasing different people or why they didn't really know exactly who they were after, yet the clues kept them going. Time after time this miscreant slipped just beyond their reach.
Eventually they found themselves overlooking a canyon where the leaders of the nine goblin tribes and close to 1500 humanoids (mostly goblins) were gathered.
They found a way into the caves of the local tribe and eventually spotted the thief. In hot pursuit the party got split up when the villain used a fog cloud scroll to obscure the stone bridge over a chasm.
Most of the party remained behind to try to rescue a member that had fallen into the chasm and was under threat by something down there with him. One party member had made it through the fog in time to see where the villain went and gave chase (you're not getting away this time!).
That one lone PC ended up in a world of hurt being outmatched by two enemies, one a doppleganger he had already experienced the power of, and the other a large creature even more powerful than an ogre (the so-called goblin king). He was taken captive and replaced by the doppleganger.
This part was played out in another room to keep secrets from those not yet exposed to the information. The player was given the chance to play the part of his imposter and took to it with aplomb.
The party was pulled back together and after some additional highjinx left the caves thinking they were safe. That is when to the surprise of everyone else the villain struck.
The player run doppleganger chose to attack the mage that was the closest character and who had his back to him. Fortunately the party had reached second level by this point and the extra hitpoints saved the day.
The looks on player faces was priceless. There was genuine confusion for a moment and eventually they got their act together and defeated this very hated foe. The PCs all survived and they killed the goblin king in the bargain too.
In the second example from a Ptolus campaign, a different set of players with a much more tactical style who aren't much for the role playing were given control of thugs in a back alley with the idea that they were going to rob a lone PC that was messing with a fellow gang member.
This story is shorter because the players thought more in board game terms of the party always needing to win and not the idea of letting story hooks develope from the possible outcome. The targeted PC was barely bruised and the entire group of thugs was easily defeated. (Boring for me, but that was their way of doing things.)
My personal style runs more to enjoying the first example than the second.
Other DMs have tried this, also with varied results. It would be nice to hear some examples. Post a little bit in the comments if you have any examples.