I think that the most profound development in Bruno's character is that he develops a sense of empathy about his world and how his relationship with Shmuel is expanding it. Bruno begins to recognize how what is happening in Auschwitz is "a very bad idea" primarily from looking at Shmuel. This shows how his characterization is expanding from an external point of view, in terms of examining how he is able to pass judgment on the what is happening in the world around him. This can be seen in how Bruno begins to question the nature of the camp in the first place. He and Shmuel begin to discuss “about the two sides of the fence and the reason it [is] there in the first place." At the same time, I think that he is developing from an internal sense, as well. Bruno is able to reflect on his own sense of self regarding his actions with Shmuel. When he fails to stand up for his friend, Bruno reflects on this about his own sense of self:
...how a boy who thought he was a good person...could act in such a cowardly way.
This shows that Bruno is developing his own sense of self, a reflection of how his characterization is growing because of his friendship with Shmuel.