Yes, like everyone else here has already stated, there was a serious chance for Game Freak to have had a fantastic character progression with Wally. Personally, I think Wally should have been made the starting character instead of Brendan, but, oh well. Might make for an interesting ROM hack sometime.
I mean, we see so many great characters have revelations and battle along side us and we battle them, etc. Not especially Wally though, he seemed like more of an ambitious joke more than anything, except at the end of Victory Road.
Don't get me wrong, I'm glad we had Steven, Wallace, Scott, Archie, and Maxie with their storyline progressions, but the two actual 'rivals' of May/Brendan and Wally were stagnant in their characters. They weren't even really used as foil characters, but more so as just... being used to fill a space. I mean there's even a change in Blue/Gary of the FR/LG and earlier games when he stops being suck a jerk. Emerald lacks that, and I would argue that Wally and May aren't even the real Rivals.
Wally sticks to his cave forever and May disappears into the sunset, where she says she's happy to know you. Sad, really.