You're right about one thing (and that's about it), the people behind the anime had no idea they'd get to make anything beyond the Kanto region. Very few television series expect to be picked up for 10+years, so the series has to change if you want to live beyond year one (see: ER, The Simpsons, Flinstones).
But character development? You do know this is an animated series based on a game where the protagonist doesn't even talk, right? Where, despite a 10 year old either walking, running, or biking across more or less an entire country, no one ages.
I question how much character development there was in the original series. Ash is shown as a very stubborn trainer up until Johto.
Ash is a mary-sue? What a shock. Of course he is. He's based off of the silent protagonist of the games. They, being the people who market the franchise, want the main character in all the media to be easily relatable. That's why you often see Ash catch Pokemon that trainers can find easily in the games. He gets anywhere between 1-3 starters, Pikachu (available in every single region, and usually fairly easy to catch), a flying/normal type that's available early on, and then there's a wild card in there too.
As to the making a new show wth new characters, the same people will still be producing the show. By your logic, the show will be at the same crossroads again in 3-5 years.
