If the story (Which wasn't anything terribly special) gets in the way of roleplaying, then you're a poor writer/game designer. No two ways about it.
Using that logic, the story would suck everytime. The more freedom and options you give the player, the more the story tends to suffer. Maybe thats not a hard fast rule, but it tends to be the case. I prefer a good mix usually. I can't recall a cut scene in KOTOR that pulled me out of the game.