It's bad character design bred from the idea that characters must be constructed in a one dimensional manner before any type of development can be made. Tom Lee went into this already, and its pretty much fair to say that while Japan enjoys that kind of predictable story telling the rest of the world simply refers to it as "bad".
I don't disagree with you but the matter is that DoA5LR (or 5U) hardly could make interesting original characters without using this system, just because any kind of development is denied to them not being included in a story mode. Even creating characters more singular and complex
on the paper, IMO the final outcome wouldn't be very different from what happens for example with the characters of the VF series, surely far from many stereotypes but that in the end are unable to say much more to many people, not having the possibiity to express them in cutscenes and interactions outside the intro and victory poses.
Mila and Rig are created toward a Western audience and so are different character, but I really think that without what we saw of them in many cutscenes they would appear us surely as not classic kind of characters (always under certain limits), but however not able to say us something more (and honestly I think that if introduced today in this way, so missing their background that we saw outside what is written in a manual, people would think the same even of the old characters: I can already see Ayane labeled as a dark Kasumi with people asking if we really need of the "yin" side of the main character XD). Under this matter, maybe seems just natural to have seen Mila and Rig created when they could be supported from an inclusion in a story mode (in addition to want appeal purposefully the Western market with the release of DoA5).
It's for this reason that the story mode (or anyway to see a character relate with others) is imo very important in this kind of games: indipendently from considering the plot good or bad, it's very useful for building the personality of the roster in a fighting game, of course if these scenes are wisely used. Marie Rose, Phase 4, Nyotengu and Honoka so far can't get the benefits from it, so I believe that it's inevitable that the developers have to make them very close to clichè characters so to create an interest in the audience that more or less can be already able to build in their mind the character's personality that they will show in future, just on the basis of the basic generalization given to us. Then, that this system is overall popular in Japan and not outside and that the clichè used for creating them are sexy, it's another matter.
Just my 2 cents like always.
