For me, Michael was the basis of what made the show great because the character is distinctive while also being realistic. I understand the perspective of how his eccentric personality gets repetitive to the point where it seems like poor writing, but when you look at why he is the way that he is, the character development during his time on The Office is brilliant. Allow me to offer some perspective on why the life of Michael Scott is some of the greatest fiction ever written.
Michael is a jerk, but it's not intentional. It's crucial to understand that aspect.
He was picked on frequently growing up, and still struggles to be accepted. People find him to be awkward and intrusive. Women think he's shallow and immature. Despite his dedication to Dunder-Mifflin and the net results he actually achieves when it comes to business, he is still heavily underappreciated. Yet, he remains loyal, and he's not even faking it.
We all know plenty of people who use the events of their past to justify their cynicism, be it a few isolated incidents or a pattern of inadequacy. I'd venture to say we all act on bitterness from time to time, even when we know better. Taking that into consideration is why so many viewers see Michael as both the antagonist and the protagonist. We don't want to see him win, but we don't enjoy watching him be a loser. We cringe when he makes the situation worse, and cheer when he stands up for himself.
The thing about Michael is that no matter how much the universe tries to break him, he continues to be outgoing and wants to be friends with everyone he meets. His sincerity is far greater than any bitterness he has. Due to being such an outcast though, his well-meaning priorities often do more damage than good. What's important about seeing him constantly make mistakes is that once he sees how his actions have hurt others, it becomes vital to him to find a way to fix it. He is walking the road to Hell that is paved with good intentions.
While I won't write a wall-of-text on every character, it should be noted that the overall dynamic among the employees at the Scranton branch relies entirely on Michael being the catalyst. A few quick thoughts --
He's an anchor to Dwight's oddities.
He is the personification of who Jim really is -- someone who tries so hard to be cool so that he doesn't have to face the risk of failure that comes from caring about something.
He sees the potential Pam has much more clearly than she ever may.
He's persistent on getting Stanley to accept that the people he spends 40+ hours each week with year after year are more than just coworkers.
I wrote a more comprehensive comment on what makes his rapport with Toby so interesting recently if you wish to dive down that rabbit hole.
As I see it, the turning point where Michael finally accepts who he really is occurs during the Scott's Tots episode. It's an episode that is painful for many to watch because of how extreme the situation is that Michael has found himself in, and can reasonably be dismissed by some viewers as an attempt by the writers to put together an absurd plot. However, the mistake Michael makes is arguably the one that affects his arc more than anything else.
Michael lives in a world where his "big break" is just around the corner. He honestly believes that during his lifetime, he will own a restaurant that just serves cereal, write a best-selling book, direct (and star in) a hit blockbuster action film etc.. Sooner or later, one of his genius ideas will surely provide him with the lifestyle he's always felt he's earned.
Near the end of the episode, he writes four checks for $1000 each to one of the students in the interest of at least paying for books. It's a small gesture, all things considered, but it's the best he can do to even coming close to resolving the mess of promising to pay for an entire class' college tuition.
Michael tells the student to call him before cashing each check so that he can move some money around. This is where Michael finally acts on the reality he has, not the one he wants. He knows he won't be rich and successful over the next four years, and that the cost of the books is going to be a heavy burden on his finances. Still, he follows through with something practical as opposed to being his former self, who would have made some grand attempt to save the world.
tl;dr Sorry, I went on far longer than I initially planned, and honestly could talk for days about the glory of Michael freakin' Scott. In short, he's much more complicated than just being a silly fictional character who does dumb things at the expense of those around him. They say that everyone knows a Michael Scott, and if you don't, it's you.