There are a couple aspects as to why I rolled the Diplomacy check.
You are correct that I am limiting extended NPC interactions right now. I've been trying to give at least brief NPC responses. I do intend for you to get acquainted with them, but I am also trying to portray the rather rushed and excited festival atmosphere. There are so many things going on, not a lot of people are stopping to smell the roses. If I've missed any, I apologize. It's also important for the player characters to get to know each other, since you'll be spending the most time with them, it's good to bond early. As for NPCs, you will have many chances to have more detailed conversations in the future. Look at the current situation as a chance to learn some of the main players and popular figures in town and make acquaintance with them. You will have time for more complex relationships eventually, but so far only a few hours have actually passed in game time.