Is the dialogue wheel just as effective as any other dialogue interface for reactive stories with lots and lots of options and possibility space, yes or no?
Since you won't stop bringing that up regardless of the invalidity of your other comments:
Yes.
The reason why is because the dialogue wheel is simply a tool for presenting player dialogue options. That's it. Even if we accept that we are limited to a total of 6 possible significant dialogue choices, hell, even 4, that affords as much or even more depth and nuance to narrative than games using traditional dialogue trees or keyword systems. Give me an example where you have 10 different dialogue options and all lead to substantially different outcomes. Not even Planescape does this.
The problem you have is that you are hung up on the assumption that the dialogue wheel in some way limits what the player can do or say with respect to narrative depth. But I don't buy that offering the player 4 versions of a line, with "truth" and "lie" next to them, is something that substantially impacts gameplay because it has no in-game consequence, only player LARPing consequence. While it's true that game narrative is a fusion of the story and game experience provided by the game creators and the player's interpretation and interaction with that game, you could then make the argument that any story can be infinitely deep because any player can LARP whatever they want into it, and that's not a reasonable discussion to have in the context of RPG dialogue system design.
Would it blow your mind if I told you that you can achieve equal results with a dialogue wheel to more traditional systems? It's true, because the dialogue wheel's limited options have nothing to do with how many total options can
possibly be provided by it. Furthermore, the configuration of the dialogue tree or the player's lines as delivered can be changed based on context. Maybe a dialogue option labeled "revenge" can give you two vastly different lines and outcomes depending on what has previously happened in the story. And there's nothing stopping you from including skill checks with failure and success states, or nested dialogue wheel choices - for example, one dialogue node dedicated to selecting an "overall" response to a topic, followed by another node where the player can select a more nuanced response.
In other words, yes, I think everything you're saying about dialogue wheels compared to traditional dialogue systems is bullshit. You are conflating the presentation of dialogue options with the total possible number of options, the configuration of the dialogue tree itself, and the possible depth and integration of RPG mechanics with the dialogue wheel itself.
What
matters about designing RPG-style dialogue is the breadth, variety and consequence in the
meaning of the dialogue lines that the system facilitates. Strictly speaking, I have yet to see a game which is substantially limited this way even by providing at most 2 choices at every node. This is because the only significant limitation on the reactivity and depth of a game's dialogue system is the amount of unique content the game's developers can produce, not the number of options it can show you in a menu.