One way to develop the Daimyo is to give him a backstory. Maybe he once was a great warrior who, after seeing the destruction of war, decided to focus on ruling through diplomacy. In the fanfiction, his past experiences can influence how he treats Naruto and Hinata. He could see in them the potential to bring about a new era of peace, and thus guide them in different ways depending on his own knowledge and wisdom. He could also be developed as a character with his own flaws, like being overly cautious at times which might cause some conflicts with Naruto's more impulsive nature.
The Daimyo can be developed by showing his relationships with other characters in the Naruto universe. He might have a history with the elders of the Hidden Leaf Village. This can shape his attitude towards Naruto and Hinata. For instance, if he had a strained relationship with some of the more conservative elders, he might see Naruto and Hinata as a way to break free from old - fashioned ideas. He could also be developed as a character who is constantly evolving. As he witnesses Naruto and Hinata's growth, he too changes his views on leadership, war, and peace.
The Daimyo can be developed as a wise and shrewd leader. For example, he could start as a somewhat mysterious figure who gradually reveals his grand plans for the land. He can be shown to have a deep understanding of politics and power dynamics, and his interactions with Naruto and Hinata could be used to teach them valuable lessons about leadership and responsibility.