I spent awhile thinking about good ways to generate interesting characters, and I came up with a system that might work. I'm thinking that in addition to personality archtype, they should have different personality traits in each category to draw from. To keep the characters memorable though, the amount in each category would need to be controlled (as well as the total number allowed). I haven't really nailed down what categories I think you should use, but I have some general thoughts.
In addition to the NPCs having them, the main character should have a set of personality traits to pick in each category. This way, you can draw on elements from their past and personality.
I think you need at least a section for political/religious views. With each trait in this category, there should be a Boolean for if they actually follow their belief. For example, a character who believes that all sex is wrong, but has sex themselves, would get very angry at anyone who has sex. You should also have a boolean for these traits as to whether the character actually believes their belief, or if it's something they have convinced themselves that the believe. These two things would be used in gauging the reaction a character would have to various situations. (and would probably be easy to code. You have it generate a different value for each emotion based on the flags in different sections, and their contained Booleans. Whichever emotion was strongest would be what determines which reactions the character pulls from it's archytpe's dialog bank)
There also needs to be a past triumphs section, as well as a past indiscretions/dark secrets section. Every character has a past, and if the player gets to know the characters, the events in their past need to be mentioned by the NPC. Each of these should have a shame and pride value (some people are ashamed of their accomplishments, and proud of things others would consider horrible).
Past that, the ideas I have are just floaty bits in the back of my head. But I think with a lot of thought, it could be condensed to the point where you could make interesting characters without needing a novel's length of dialog for each possible personality trait for each archtype. That would leave whoever's writing the dialog free to really put a lot of effort into each of the dramatic points, or the banter.
I really hope you move forward with this. I'd really like to be a part of it XD
@WhiteRose, Oooooh, that's a good idea. I like the idea of sequels. I just kinda figured the player wouldn't age and the story wouldn't span long enough for sequels to be necessary. I think after a major story ark has been concluded, the system should have some sort of algorithm in place to decide how much time should pass till the next arc of the story, and which characters survived and are still around. The amount of bonding the player did with them should play a big role in whoever makes the cut for the sequel.