I think both approaches can work in the appropriate setting. I prefer being able to use all the skills and paths in a party, so I like at least four characters.
Like Sir Markus, I like the way the party (4)was handled in the earlier Might & Magic titles, and also Icewind Dale & TOEE, where you could roll or create (4-6)and then develop all your party members.
But of course, for that to be fun in terms of role-playing, the NPC has to be controllable--unlike, for instance, the "henchmen" in NWN1, who basically just did their own thing (when not getting lost). A lot of games are not very good at this.
A good, well-developed single character is better than a vague,generic & uncontrollable party.