This one has horrible ugly character models, it seriously looks like something from early 2000 and not 2004. The character model are very similar to Phantasy Star online 1 for the Dreamcast. How did this happen when the first game (2001) had great graphics? The models seriously look bad, their mouths barely move, their eyes are just textures, and in a lot of scenes their hands are mittens (think GTA 3). The character faces looks like Kingdom hearts 1 where sometimes they would use a cheaper looking model for short scenes, except in this game they do that to the characters for the entire game. The faces lack any real emotion like it did in the original. The facial animation is just bad this time around. The animations are also downgrades, with all characters having the same robotic running animation, and the walking animation just looks bad.
Also the voice acting is pretty bland, especially main character Shion and Chaos. What happened man?! The sound effects are also worst since everything just sounds bad. The guns have a weak "thud" to them, hits no longer have the same impact that they did during the first game, and the battle music is completely forgettable. The music in general isn't really good, it is this goofy upbeat funny sci-fi "arcade" type music. It just doesn't match the game and story. The battle system is changed, so those who enjoyed the first game's battle system will probably be a little taken back by the new system. There is no more tech points, you can't equip armor or weapons anymore, you can charge attacks or customized your attacks, and for some reason they completely got rid of the money system in the game. You can no longer buy stuff, and there are no stores. You get items by killing enemies so get used to a lot of battles.
It takes a while to get used to the downgraded graphics, music, voice acting, and battle system, but when you do get used to it I guess the game is "alright at best." Seriously the graphics look like a PS2 launch title, and not something from 2004. By 2004 we had God of War, Resident Evil 4, Metal Gear Solid 3, and Fatal Frame 2.
It is disappointing no doubt, but part 3 is good so just know that after Ep2 you will be back to similar Xenosaga with Ep3.
7/10.