On that note, I'd say more animated characters work better, but that would be promoting my last demo. None the less, I think more animated characters tell stories much more effectively. If you want to check out that demo, find the thread in this forum called "Once More, With Feeling", I'm too lazy to link to it right now. People in Real Life also use Body Language to express what they are saying, which seems to be forgotten when people build games.
But for the record, I agree on what you said. The dialogue between the characters shouldnt sound like it is coming from a writer, but from a person. Moms call their kids "kiddo", but they dont call everyone "kiddo". Every character should have a uninque relationship with every other character. Two characters might not like each other and insult each other constantly, but they dont always insult the main character, or vice versa.
Great point!