Yes, please, more characterization. We need more fleshed-out characters in Zelda. MM had a lot, since there were a bajillion sidequests. TP was pretty good with that too, since the main focus of that game was the story (although Castle Town nearly killed me as well; hardly any of the people there had anything to say). Characters should have more than one line.
Also, when there's a drastic change in Link's appearance, people should react differently. I'm not going to count Wolf Link as one, because of course it's common sense to have people run away from a wolf. Here's an example: In OoT, when you're young Link, there's always a guard in the section between Hyrule Castle's gate and the Castle Town. Whenever I talked to him he usually said, "Welcome to Hyrule Castle!" (or something like that; I don't specifically remember). But when I put on the bunny hood and talked to him again, he was like, "....That's an unusual mask." Now that seems like something minor, and it is, but I won't forget that because I was like, "Woah! This person actually had something different and relevant to say to me this time!" I liked that.