It was the only element of her "development", and that's the problem. There was nothing interesting about her one-sided infatuation with Lelouch, and her jealousy of C2 was downright disgusting.
Except it wasn't one-sided. Lelouch shows he does care deeply about Kallen. Whether they're romantic feelings or not, saying it's "one-sided" implies indifference on Lelouch's part, and we both know that's untrue. A lot of Kallen's development came in the first season. The second season focused on her relationship with Lelouch because they couldn't explore it at all in the first season.
As for her being jealous of C2, I found it cute. Mainly because the tough-as-nails chick still has some insecurities about herself.
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TheRock ~ Slow dramatic zoom-pan. Doesn't phase the hooded man.