Shelley, I do think “characters aren’t all good or bad” does apply to romances, only perhaps to a lesser degree than we would see in other types of novels. In other words, it’s likely that the “bad” we’re talking about is the tendency to eat too many cookies or, say, the unwillingness to take necessary risks, or being unreasonably stubborn. Traits that don’t automatically create malicious actions but that we can see cause problems and that we can see change as the novel progresses (to show character change). In the course of true love, she learns to take risks! In the course of true love, he learns not to be so stubborn! That kind of thing.
The problem of conflict being driven by misunderstandings is so common! And it’s so implausible. The only time it really works is when it’s some sort of outrageous comic novel on the order of those British farces where people are falling out of closets while eavesdropping. But that kind of farce is not exactly what romance reader are generally looking for; even in lighthearted stories they want an emotional component that pays off their investment in the characters/story.
Your point about unresolved internal conflicts is very good. The story may end HEA, but we don’t necessarily believe in it as wholeheartedly as we good. The ending is less satisfying.
Thanks for chiming in!