If a game has any real degree of choice in character building, you need to understand how play works before you can effectively build a character. I can't effectively decide between two levels in Parry and 2 levels in Block or 1 of each if I don't know how combat works.I'm going to disagree here. I think that character building should be one of the first chapters. I think there can be a quick intro that explains the premise of the game and maybe a few key terms, but very quickly after that.
Why? Because that's how we get into the game. That's what I care about most when I start a new game.
If we put all the rules and setting info first before character creation it sends a message that you have to know all this stuff before you are allowed to make a character, which I think can be intimidating to players new to the system and even more so to people who are new to the hobby.
I'm playing Exalted right now, which has more than 100 pages of lore before it gets to character creation, and feels odd to me every time. I love the lore in Exalted, but I definitely have not read it all, and so little of that 100 pages is actually relevant to my character.