In 1.x, your characters were extremely animated in cutscenes. When SE did their poll at the end of its life cycle, players overwhelmingly said they didn't like it. The largest complaint was that the characters reacted in ways the players would not have in given situations. That's why our characters are observers, now.

That said, I read something in one of the recent Q&As where yoshi-p is considering giving us a few options for how our characters would respond during cutscenes. This would make them more interactive without breaking immersion.