Ico
I think this is all I really need to say, this game had easily one of the most touching stories with great characters in a game and there is minimal dialogue and one of the characters even speaks in a language you never understand. They both have little backstory and little dialogue together but the ending is an emotional rollercoaster for the player. So yes, I would ague you don't need character development to make a good story, it really depends on what kind of story you are doing.
I feel the whole cast (XII) actually has great development that doesn't need to rely on the weakness of out place cheesy expositions like other JRPGs. Vaan has one of the most realistic "coming of age" stories that it just makes you realize how silly every other version has been up until him, Balthier deals with his issues with his father, Fran with her sisters, Basch and his brother, and Penelo helps to bridge the gap between Dalmasca and Archades. Ashe herself throws an entire RPG cliche on its head as she struggles to choose between her desire for revenge and her duty to her people.
Vayne himself is easily more complex than most previous villains in the series. The fact people debate whether he should be counted as a true villain when his goals were noble and the way he treated his brother show that he's not some mindless drone out for godhood like every other RPG villain of the last 20 years. Ivalice itself is a massive world that feels more alive and has more content in its little region than most of the FFs combined. I feel its very easy to find something appealing about its world as long as one bothers to explore and look into it.
On topic: Yes, I did really like FFXII cause it was the breath of fresh air the series really needed, it did away with the over the top anime cliche nonsense and actually tried to bring in (though lobotomized) a mature political story and I feel Lady Ashe' personal conflict is easily one of the most human and most inspiring story in the series history outside of perhaps FFTactics.
I like the Gambit system, I enjoyed customizing my party with an equipment system from FFTactics that puts more weight on strategy than other titles, I loved Mark Hunts that actually challenged me to learn new ways to use the combat system, I loved the fact I could actually explore seeing as how the two single player console entries this game is sandwiched between are both on rails. I like talking to NPC's and stumbling upon unexpected (and often humorous) sidequests, I liked fishing (maybe not as much as BoF but that one is practically a fishing sim), and I love the fact that it doesn't have a real fairy tale ending. and I liked the fact I could summon the smurfing Lucavi from Tactics and that they weren't as blatantly broken as the Aeons.
It would be faster if I just mentioned what I didn't like about the game cause that list is surprisingly short and everyone knows I'm nitpicky as hell when it comes to RPGs. I seriously found nothing but love for this game. Could it be better? Hell yeah, but what game couldn't? There is no perfect game so I almost feel this question is rhetorical at best.