I think it handled the characters way better in ME2. Look at Garrus, Legion, Tali, Joker, Mordin, Miranda (as much as I dislike her personally, she's a strong character), EDI and the others i can't be bothered to list.
Sure, some were lackluster like Samara/Morinth and Jacob, but the majority were memorable and at least rather interesting.
Despite Garrus being my favourite character he wasn't all that great in ME1, same with Tali (Though Tali's over rated as all hell). Only Ashley was a decent character. Wrex, too.
I also feel it did a great job of expanding on the actual universe, with more races and planets to explore and interact with. The codex offered tons more information than what we saw in ME1, too.
So while ME1 is probably my favourite, ME2 is still a solid Mass Effect game. ME3 has it's issues, but it was still a great game in my eyes, if a little restrictive with the auto-dialogue... but -blam!-, that ending. Still haven't gotten over that.
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Characters were irrelevant to the plot. And they didn't interact with or play off each other in any way whatsoever. They were often ridiculously similar (Thane and Samara, Miranda and Jack, Jacob and Space Hamster, Grunt and Supply Crates). And how about we have a game *about* something in the ME universe to expand the ME universe, instead of hastily adding GoW's Locusts to ME and making the game about them.