Somewhere along the line during Monolithsoft's PR junkets and interviews and whatnot, Xenosaga fans came to believe that Episode 2 would wrap up the current plot line involving the characters introduced in Episode 1, and that Episode 3 would jump ahead a few thousand years in the timeline and introduce new characters. Apparently, this is not the case. Episode 2 does resolve some conflicts and bring closure to a few issues, but none that are very major or have much to do with the grand scheme of things. It seems that most of the cast will be returning for Episode 3.
While there are still many fans who stubbornly cling to the hope that Xenosaga will follow a course of events that will eventually lead into a retelling or even a remake of 1998's Xenogears, Episode 2 doesn't do much to bring us any closer to that. Notice that I didn't say that it doesn't do ANYTHING to bring us closer to that. However, I remain firm in my belief that if Xenosaga does have any relation to Xenogears, it will tell the untold stories that took place in episodes 1 and 6 in the Xenogears epic, as these are the only two episodes that weren't completely outlined and fleshed out in either Xenogears the game or the book Xenogears Perfect Works. In other words, these are the two remaining parts of the 15,000+ year story in which the authors still have the opportunity to be as creative as possible without contradicting the events told of Xenogears.
In any case, Xenosaga Episode 2 continues to follow the same path as Episode 1 did: This is a relatively small, sensibly sized RPG. It isn't the grotesquely bloated epic that Xenogears was, and fans who were hoping it would be are bound to be disappointed.