Kabuto's Guide To Good Character Design For Dummies

Realize that the main characters must be likable. Even if the character is someone that you love to hate. A good example of this would be Cecil from FF3 for the SNES. (Or for you non-true FF fans, FF6 for the PS.) She has a very interesting story line behind her, and all the things that she goes trough makes her all the more lovable. A bad example would be either Kane or Lynch. These character just have an ugly personality and you quickly lose interest in the game. Another thing you should take note of is that you should mix up your party. Don't just have a bunch of emo children there. Mix it up, have a spunky shapeshifter, a cursed witch, a young arrogant scout, and a cold knight. This will add verity to your game, keeping the player coming back for more.
Tip: Have atleast 10 quests for each character in your game, that lets you explore their background more, people love to know more bout the characters they are playing as.

This should be the polar opposite of the main character. Unless the antagonist has a hidden agenda (I will explain later.) they should be as unlikeable as possible! But, not annoying kind of unlikable, but the just having a terrible personality. Try making them as much of a douche bag as possible (Have him/her kick a kitten each time they pass by one or something). A good example would be Tidus's father as he describes him in like the first three hours of gameplay (What an asshole!). A bad example would be Magus from Chrono Trigger. Make sure to have at least one antagonist with a hidden agenda. It adds in plot twists to the game which could range from the character taking over the world to learning that he's a good guy and joining the party.

Every NPC should and must have a life. If there is a woman always hanging around the church why is she there? Did her son die? Is she waiting for some one that never comes? Is she a nun? I strongly believe that 90% of the NPCs you talk to should lead to a side quest. The how long is it, should be determined by you. If you really wanna get creative, take advantage of the day & night system. For example close the shops at night, very few people should be walking around on the street at 11:00 PM. If there is a festival people should be gathered in the town hall. Don't forget people have to: Eat, Sleep, have hobbies, and Socialize to survive without going insane. So next time you make an NPC, think about this: Does it have a family? Did some terrible tragedy happen? Why is he here at this time? What are it's hobbies? Who are it's friends? etc.