That's the part that I think is extremely over rated. D;
It's fun as a game, but the plot and characters are contrived like woah.
I like more of its structure and significance rather then its characters. But I do like all the characters, their motivations, and see what developments they're going through and their flawed personalities that, while come from a place of love, ultimately drive them more to their tragic destiny. But, sadly, the characters needed more... character then what we were given. If it did, BBS would have been much stronger story. Vanitas is probably the biggest wasted opportunity in that game though, as he doesn't really have that much motivation to be the way he is other then because he works for Xehanort, he's pure darkness so you expect him to have that personality, and he has no other meaning in life anyways, which is barely addressed in the game at all.
But you're judging the plot as well, so I guess it just comes down to personal opinion really. The game as a whole bit overrated though amongst fans as as "the best thing ever" but I think its only because its the first KH game that came out that everyone was on board with (I like 358/2 more then most lol). Doesn't mean its a bad game or a bad story. It just could've been done better.
To me, BBS has the best plot and really good, different characters but not the best character development for them; 358/2 has the best character development but its plot is slow as hell; the first KH is just a simple story that is kind of ripping off other stories like it, with a few instances of originality here and there but you already know where its going until the last few minutes. The only shocking thing about KH to me was Sora stabbing himself in the chest and fading away (I just didn't expect that in a Disney game lol); I love the plot for KH2 more then KH1 but the original characters needed to be more involved in the overall adventure rather then just the beginning, the middle, and the end moments. I mean, they still are relevant, its just that they're barely addressed and we don't see them until those moments happen; Chain of Memories, even though I like the plot and its characters, the story is more confusing then engaging half the time(I guess its kind of the point though) and the dialogue is the worst I've heard in a KH game; Re:coded really could just boiled down to a secret cut scene at the end of some other game or you could've just made it a shorter story really. Strangely, it has really good character development between all the characters but its kind of wasted because its all in a computer and these are a Data Sora and Data Riku that the Disney characters are interacting with, so none of really matters in the end except for the stuff that happens at the end with Data Roxas and Data Namine; DDD has the second best character development (both Sora and Riku) in the games but it over complicates a plot that was already complicated to begin with.