The performance of fault diagnosis systems is highly affected by data quality in cyber-physical power systems. These systems generate massive amounts of data that overburden the system with excessive computational costs. Another issue is the presence of noise in recorded measurements, which prevents building a precise decision model. Furthermore, the diagnostic model is often provided with a mixture of redundant measurements that may deviate it from learning normal and fault distributions. This paper presents the effect of feature engineering on mitigating the aforementioned challenges in cyber-physical systems. Feature selection and dimensionality reduction methods are combined with decision models to simulate data-driven fault diagnosis in a 118-bus power system. A comparative study is enabled accordingly to compare several advanced techniques in both domains. Dimensionality reduction and feature selection methods are compared both jointly and separately. Finally, experiments are concluded, and a setting is suggested that enhances data quality for fault diagnosis.