Virtual characters have been employed for many purposes including interacting with players of serious games, with a purpose to increase engagement. These characters are often embodied conversational agents playing diverse roles, such as demonstrators, guides, teachers or interviewers. Recently, much research has been conducted into properties that affect the realism and plausibility of virtual characters, but it is less clear whether the inclusion of interactive agents in serious applications can enhance a user's engagement with the application, or indeed increase efficacy. In a first step towards answering these questions, we conducted a study where a Virtual Learning Environment was used to examine the effect of employing a virtual character to deliver a lesson. In order to investigate whether increased familiarity between the player and the character would help achieve learning outcomes, we allowed participants to customize the physical appearance of the character. We used direct and indirect measures to assess engagement and learning; we measured knowledge retention to ascertain learning via a test at the end of the lesson, and also measured participants' perceived engagement with the lesson. Our findings show that a virtual character can be an effective learning aid, causing heightened engagement and retention of knowledge. However, allowing participants to customize character appearance resulted in inhibited engagement, which was contrary to what we expected.