Better Game Characters By Design

So I took this book out of the library,  Better Game Characters By Design: A Psychological Approach, and within it the author, Katherine Isbister, covers the subject of culture in Chapter 3.

It seems this is pretty much what I need to be looking at, as Isbister correctly writes in the chapter introduction that 'it is dangerously easy to resort to over-simplified stereotypical notions of what someone from another culture is like'. This is particularly true for those who have little to no educated knowledge of the culture in question. 

Josh and I discussed the topic of culture, and agreed that it would be a good idea to explore this very thing, in fact. Basically, the intention is to explore character designs based on my current knowledge of several cultures and how I perceive them at this stage, and then to design characters from the same cultures, having researched and learned an accurate portrayal. This may or may not - more likely than not in my opinion - in fact support that opening quote from Isbister.

Basically Isbister tries to tackle how to avoid falling into those stereotypical notions.
I want to explore whether stereotypes can ultimately be more easily related to, given that is how they are perceived by the larger percentage of people. Not only that, but can characters inspired by real cultures be fantasized and would an audience rather see than strict realism?