The other reason for chat bubbles is... 90% of a players attention... is in the center of the screen, that being so, it would actually be easier to talk to other ppl. They could off-set the chat bubbles to the right or left (option) of a characters mid point, and add filters for who you can see if necessary.

Say = Close to your character
Yell = Further away from character
Shout = Much Further away
tell = Yeah were speaking telepathicly in the chat box here lol.


Then there is the infamous, intelligent mobs talking smack when your kicking their backside and enjoying their artificially induced ima kill you mentality lol. Gotta love those.