In other RPGs of the era the independant existence of the NPCs are also not recognised in many ways. Conversations don't flow differently if you have an NPC do the talking in Baldur's Gate, for instance. The only thing they are lacking in Icewind Dale compared to NPCs is dialogue.
And yes, there is a difference, and I'm sure you see that there is. One set of characters you created. One set you didn't.
Which RPGs are we talking about? Fallout 1 and 2 had an entire personal story crafted around the background of the PC as the Vault Dweller/Chosen One. BG1 had an incredibly set background for the protagonist as raised at Candlekeep, plus your fixed destiny of being the Bhaalspawn. There was one protagonist for that game, even if you could create more murder automatons to control. Planescape Torment was crafted specifically to your pre-existing (complex) history; it was the main driver of that world.
As for "NPCs" doing the talking in BG1, if I could actually find screens, I'd show you that the game clearly assumes that the person doing the talking is the Bhaalspawn. There are particular dialogues that only work for the Bhaalspawn talking, regardless of who you start the conversation with.
Well, technically, I'd say that a character that only exists in your head still is a character. An author's character is still a character before they begin writing the novel featuring that character; it's just that nobody is aware of that character yet.
An RPG is nothing like a book, because you're not the architect of everything that isn't the party, the ruleset of the world is out of your control, and you can't drive toward a particular endgame. Drawing a parallel between writing and RPG-character creation is a non-starter because what a writer does and what an RPG player does are nothing alike.
The player does have an active role unlike a reader, but it's very limited in scope, to particular emanations of a character.
Technicalities aside, a fully realised character of someone else's creation is surely a character, but if I'm not the one making the decisions about that character (who they are, and not just what they're doing now), to me that's anywhere from a very limited roleplaying game to not a roleplaying game at all. It could be fun, but it's something else. They don't need to have backgrounds in the game. Many games don't specify your character's background beyond a certain point. Before coming to the Academy in NWN, for instance, the character could've been doing just about anything. Yes, it's preferable when the world reacts to your characters individually, but I wouldn't say it's required -- and if the price of reactivity is an inability to choose, I'll pay the other price of lessened reactivity instead.
A fully realized character created by someone else is embedded in the world. If we are talking about writers, that character is an important interrelated part of narrative being created. You can't just isolate that person from the world; he or she is part of what allows that world to exist. Your murder automaton is not such a thing. In writing, if my character suddenly changes gender, sexuality and species, that alters the world or story. The RPG murder automaton is irrelevant - nothing about the object you create changes the world. It is literally a blank slate whose defining characteristics have no value.
A RPG absent reactivty isn't an RPG - it's a combat simulator that requires you to construct an elaborate fantasy so that your murder automaton is something is a character.
Out of curiousity, do you feel the same way about Temple of Elemental Evil?
I think TOEE is a D&D combat simulator, yes. Just like Diablo is a hack&slash PC game. I consider IWD and Diablo to be the same thing - because in either case I can construct an elaborate mental fantasy about what my murder machine is supposed to be as an entity.
Which, I would say, gives you more freedom to play whatever characters you want. I'm not saying that Icewind Dale doesn't have flaws -- it certainly does -- but it is a roleplaying game, and the game not reacting to a decision you make about your character is better than not allowing you to make that decision for yourself (except taken to ridiculous extremes, of course). The dialogue is pretty primitive with few options and it rarely allows you to express very different personalities in it, different characters aren't treated differently within the party, and it's overall very linear. I'll surely not deny any of that. But it lets you make whatever character you want, and that's a good thing.
It doesn't let me make a character I want, because a character I want express views, has ties to other persons in the world, and exists as something other than a machine that kills, robs graves, strips the dead of their valuables, and unlocks doors and chests.
The very fact that I could headcannon that my created part in IWD is a time-traveling group of flesh eating aliens from Zorblax 22 or a party of adventurers from Tinckledove, Illinois who were summoned into the dimension by an evil sorcerer makes the notion that I can create whatever character I want meaningless.
I can close my eyes and fantasy hundreds of characters right now. But I can't play them in an RPG, because the game reacts to nothing.
No cRPG will ever be able to react completely to your characters the way the GM would in a face-to-face game, at least not for the forseeable future, but constraining your character to an extremely narrow range of options is not the way to go. There's middle ground to be had in world reactivity to your specific character/character constraint between Icewind Dale and Mass Effect, and so far I'd say that DA:O is probably the best compromise.
Let me preface this by saying: let's ignore PC VO and dialogue inputs for the moment and focus simply on the character design and the specificity of the set background. DA:O constrains your character exactly as much as ME does. You have a set background, set pre-existing relationships, a defined mission against evil that you can't turn down given to you by someone else, and freedom to choose the errands that you will run for people in different areas while ostensibly achieving your own goals.
The problems between DA2, DA:O and ME1-3 don't come in terms of the extent to which your character is defined, but to the degree that the actual story as drafted allows you to express different personalities. That's a totally different design issue.