I don't have any intentions on resurrecting the dead horse only to beat it down again (ah, it looks like someone's already did that) but really, there's a difference between static character development and one that's being skimmed over due to character dislike, or simply being more in focus with other characters (in this case, Alto and Ranka) I think you gave her character too little credit.
Many things have been said about Sheryl's character development that you can easily find reference so I won't get into it(
the ensuing discussions that followed after Ghostlightning's good post are a good read). What I did find most fascinating though, was how the progression of Sheryl's character had caused a dramatic shift fandom perceptions of her; for example, in its peak back in 2008, Livejournal itself was a haven for Ranka fans, with poll numbers conducted heavily against Sheryl. However, by the near end of the series, the results were overturned: it was now Sheryl who had the upper hand, and from the comments, many fans who had once harboured dislike for her evidently had a change of heart. If you ask, you'll find that a few Sheryl fans had the same experience as well (myself included).
I believe Ranka was still popular - but the shift in people's perceptions of Sheryl was most dramatic during the airing of the latter half of the series: where Sheryl's character underwent a significant turning point. And on the other end of the spectrum, Ranka's own popularity suffered only after Episode 20. It was amazing to watch, but hey, I did recall defending her and blergh, Westlo and the others weren't having any of it.
You could argue that the "fanservice" do play a part in her upsurge in popularity, but I'd give most of the credit to, simply put, good character development.
(It helps also, if you're watching the series on a weekly basis, as opposed to devouring it at one go: that's possibly a reason why you thought she was lacking. It's the #1 reason why people tend to overlook details lol)
There was an article that was posted about this earlier (
Karice, were you the one who translated this? Would you be able to post it? 
) I believe this conversation was intentionally constructed to misled Sheryl to jumping into conclusions, as the topic being discussed between Klan and Alto was completely different from what she, and some of us understood it to be: they were both referring to Alto's "love for Frontier", not anyone in general. I myself was a little unsure of this scene, until the translations cleared things up.
This isn't referring to you, but it's astounding how reluctant some fans are in accepting this clarification in favor of their bias, even with a direct reference from the source itself. Shipping is a passionate activity, but sometimes, yes, Japanese Animu encourages you to see past surface value and
think.