How is Dimmesdale the most tragic character in the book and one of Hawthorne's best psychological portraits? If not, then why is he not?

Dimmesdale is one of Hawthorne’s best psychological portraits in that Hawthorne allows us to glimpse Dimmedale’s inner life, and his struggle and rejection of that inner life. 

In rejecting his authentic inner experience in favor of the beliefs of the church fathers, Dimmesdale is the most tragic character in The Scarlet Letter. Unlike Hester, Dimmedale accepts the church fathers’ definition of adultery as a sin. 

Dimmesdale’s greater sin, however, is not adultery but that of denying himself a loving and sexual relationship with Hester.  If Dimmesdale had admitted his sexual relationship with Hester and had chosen to leave town with her, as she suggested, he would have found redemption in their relationship. After all, it is his relationship with Hester that evokes his passion, his spirituality, and makes him an effective preacher.  

Hawthorne describes Dimmesdale’s preaching voice like this: “This vocal organ was in itself a rich endowment;. . .  Like all other music, it breathed passion and pathos, and emotions high or tender, in a tongue native to the human heart.” Dimmesdale’s ability to connect with the human heart is a result of his connecting with his own heart through loving Hester.

Hester sees that Dimmesdale is denying his inner life and is suffering mentally and physically because of it. She confronts him saying, “Thou art crushed under this seven years’ of weight and misery. . . Exchange this false life of thine for a true one.”

As a result of this conversation with Hester, “His spirit rose as it were, with a bound, and attained a nearer prospect of the sky, than throughout all the misery which had kept him groveling on the earth. . .” Dimmesdale says, “Do I feel joy again?. . . O Hester, thou art my better angle! I seem to have flung myself-sick, sin-stained, and sorrow-blackened-down upon these forest-leaves, and to have risen up all made anew, with new powers to glorify Him that hath been merciful? This is already the better life!”

In the forest, Hester and Dimmesdale resurrect their love and Hawthorn provides us the following description about their love. “Such was the sympathy of Nature--that wild, heathen Nature of the forest, never subjugated by human law, nor illumined by higher truth--with the bliss of these two spirits! Love, whether newly born, or aroused from a deathlike slumber, must always create a sunshine, filling the heart so full of radiance, that it overflows upon the outward world.”

Hawthorn describes Dimmesdale’s insight in the forest with Hester like this, “Another man had returned out of the forest; a wiser one; one with a knowledge of hidden mysteries which the simplicity of the former never could have reached.”

Dimmesdale’s tragedy is that he lacks the courage to hold on to that new and wiser man, and to his new insight that Hester is his better angle. Instead of validating his own inner experience, Dimmedale allows himself to revert to the repressive beliefs held by the church fathers. In so choosing, he deserts Hester for the second time and dooms himself to a public and tragic death on the scaffold.

Post Script: Dimmesdale will not have died in vain if those of us living today learn from his tragedy by learning to respect our own inner experience and learning that a passionate, loving, sexual relationship is a path to a spiritual experience. When we can do that, we will have gained knowledge of the hidden mysteries.