Yeah, interactions definitely help with building characters.
I think it's important to explore character motivations, because otherwise they can behave erratically. Terenia would never walk up to Claxter and give him a hug, because her personality, along with her experiences with him, would make that utterly nonsensical. In fact, she wouldn't walk up to anyone and give them a hug, because her personality is so strongly against it. Unless it is someone she deeply trusts. All of that rests on her past. If I haven't explored her personality, I might make her do something that doesn't make sense. Similarly, things that do make sense (like her killing her sister) might not happen simply because I don't want them to (I really, really didn't want to kill off Tamora, but I had no choice).