Now that I'm awake, I'll explain.
If building NPCs was really a form of play, then getting your whole group to do it with you would be a viable idea. Turns out, people don't think spending a session just making NPCs is a good idea so I submit it shouldn't be considered a form of play.
Monopoly. Kind of a crappy game, imho. I'm not interested in engaging in it. Does that mean it isn't a form of play at all? For anyone? Anywhere? No, it just means it is a kind of crappy game. So maybe building (say, 3e D&D) NPCs and monsters is kind of a crappy game.
Alas for your assertion, I noted that "
not all play is with the other players." I did this with RPG GMs in mind, actually. Some play is solitaire. So, no, getting the whole group together to do it is not required to be a form of play. If the GM likes noodling with NPCs and setting elements and creating encounters, for that GM, it may be a form of play, rather than work.
Though, interestingly, before traditional play begins, before even creating characters, the
Dresden Files RPG has a group minigame/activity of creating the city they will play the game proper within, including a bunch of major NPCs that they'll be interacting with.
I've been through it, it was pretty fun.
So, I think before throwing it away as non-play, maybe we'd have to consider the context and method - it may be a form of play for the group if it is structured and positioned appropriately.