@Thenomain Development /can be/ advancement.
It is development to learn new skills to show the character growing in ways that they didn't before or to develop better skills/powers.
It's also development for them to develop new merits and flaws over the course of the stories that they participate in.
It's development if they just change their emotional feelings on a person/thing/event/subject.
None of these is more 'right' than the other when it comes to development.
Your story is talking about how your character was 'individualized' which is not the same thing as 'develop' a character. You're also talking about a game system which didn't have the variety of skill and variation of abilities that exists even in modern D&D 5e what with different character paths, feats, skills, etc. not even including abilities.
The great thing about character development is it /can/ be a lot of different things, and mean different things to different individuals, all of which are equally accurate to them or to the game system as it was designed.
You say XP is an OOC conceit to allow for bigger and badassier challenges.
GAME SYSTEMS are an OOC conceit to allow for bigger and badassier challenges.
I'm also not even talking about a /levelled/ system like the games you are using in your 'examples' (WoW, CoH, D&D).
I also find it somewhat amusing that anyone, anywhere, is telling people that they're doing pretendy fun times /wrong/ when they are having fun. Some people enjoy increasing the size of their character sheet. They see the challenge in creating the character and how will it adapt to the changing situations (Aka experience growth) and in no way does /doing that/ mean they don't experience any other kind of development.
This is the craziest thing to be black and white on that I've seen on here in a long time.
Does the character change? Then it's development. It doesn't matter /how/ the character changes, if it's just mindset, or fame, personality (Which /does/ have stats in many systems), or if it's threw gaining/increasing abilities/powers/whatever with xp spends. It's still development. The character has changed.