You create NPC characters in the same way that you created your playable character. The only difference is that NPC's are not controllable & they shouldn't have any interfaces linked to them unless you intend to be able to control them at some point.
As to whether or not you should create an NPC as a character or as a scene object is entirely up to you & what the NPC is, or should be doing. Bear in mind that characters get automatically scaled by the way system & their z-index is defined by the animation center you set.
Objects are not scaled by the way system, but they can be scaled via Lua script since 4.x with the VObjectScale data structure field. Also objects z-index order is based on the object center you provide in the objects properties tab.
If you want to converse with an NPC then I would recommend creating the NPC as a character, because you have to create dialogs in the NPC characters dialog tab.
P.S: to place characters in a scene. You need to create a scene object. Define it's position in the properties tab. Next you need to go to the character you want to place & go to its properties tab & assign its position by linking it to the object you just created. You can also use the set character to position or set character to object action parts for placing characters.