In the majority of video games I play, I notice that NPC's are the same height. What's up with that? It kinda takes me out of the experience, when I see ten people in a row that are 5 foot 8. Anyone else notice this, or am I crazy?
Making all character models the same size has a lot of benefits when doing poses and animations.
You could solve this by having procedural animations (real-time animation retargeting) or by doing the animations for each character individually, but that would be a lot of work.
Another thing to keep in consideration is game balance. This usually doesn't affect NPCs in a single player game much, but in a competitive multiplayer game, selecting a smaller character can give the player an unfair advantage because they are harder to spot and harder to hit. So character size is no longer just an aesthetical factor but also a game balance factor. A good example where this was used intentionally is Team Fortress 2. The Heavy is larger than all other characters, so they can use him as cover. The Scout, on the other hand, is the shortest of all characters, which is great for his playstyle which is designed around avoiding enemy fire through eratic movement.