Oh yes, a well balanced game is not fun. Must have uber munchkinized powerlamer characters that can kill anything in their path without giving one challenge to the player. Oh, what fun.
I like a good old fashion fun game myself and while KotOR was a good cinematic game and had fun bits, overall it had its share of weaknesses and drawbacks that hampered the overall enjoyment of the title.
As I said before, if they didn't want to use the d20 SYstem in full, then they shouldn't have used it at all. Bioware used a partial d20 rules set, but left out the important rules that allowed game balance. They left all the rules that would have allowed greaer strategic combat. They left all the rules that would allowed the player gerater options.
Balance, strategy (and the need to use it), and character creation and developpment options are all important in creating a fun and good CRPG. KotOR lacked these elements big time.