He does looks like a Spanish-Japanese, English-speaking Jesus. Mmm....
How do you make a character a tank? Is it just a ton of HP and defence?
It takes two things:
1. The ability to take a few hits or dodge them nearly constantly.
2. Enough force/skills to keep the enemies focused on them.
Dunban dodges really well with the right skills and his awesome damage output makes him a favourite target for enemies.
And I've actually heard "naked" as a term on the GameFaqs. Is that like a way to play them?
There's a skill called Inner Peace that ups agility by 30% when not wearing any armor. Since agility makes such a huge difference in Xenoblade, it's enough to turn Dunban into a good tank for most of the game. Since he won't be wearing armor, Dunban will be running around in his underwear, hence the term 'naked Dunban'.
Though skill linking you can give other characters this ability as well, but it won't be as effective.
Sharla aside, everyone is pretty effective.
Sharla has her uses, especially when you decide to undress Dunban. He won't get hit often, but when he does, he'll lose a good chunk of his HP. It's nice when you can heal him up in one go.