The characters weren't used very effectively. The story revolved around 3 characters. Cloud, Tifa, and Aeries (even after her death). The rest were ignored. There was no importance in the other characters.
I suppose it's easy to miss Barrett at the beginning of the game, Barrett at North Corel, Red XIII at Cosmo Canyon and in the Gi Cave, Cid at Rocket Town and in the rocket... all of which were points of fairly major development focused on that character. Also, Yuffie and Vincent were optional characters, so there wasn't going to be much interaction later in the game -- and Vincent, regardless, had his fair share of development.

FF7 was not the best FF, but it's a decent game. My biggest critique of it is the story development.