The FFXIII party got more development while FFVIII's party were all shallow caricatures apart from Squall and Rinoa.

That's indisputable.

I would argue the character development was better in XIII as well since Rinoa's "development" consisted of saying she hates fighting in one scene and then it never comes up again.
Oh and she got magic powers.

Even XIII can beat that.

I felt XIII's flaws lay in the story more than the characters to be honest.

FFVIII's flaws meanwhile were...well, everything. It did nothing right. Not even Seifer, its most well-developed character, was done right. Can you say anticlimax? It was more unsatisfying than Squall's and Rinoa's first time in which they both broke down crying after five minutes.

And the plot...well, timelines are the bane of a lot of FF's. Like Sin coming back after only a few months in FFX - that's retarded. (The vague implication the Calm lasts ten years is much more sensible.) FFVIII gives us the long-lost Centra civilization taht no one knows about.
It was destroyed less than a hundred years ago.......