Hoji made the first game for me. Wang is still amusing, but 2 feels less complete & holds up better as a 'killing stuff' game than a game with a story.
I agree that the story in SW2, while still interesting if you look at the big picture (awakened drug, ancient spirits from the shadow realm making in cahoots with the yakuza, twisted family dynamics, biotech experiments...) is not as well told as the story of SW1 was (in terms of delivery and pacing, not to mention the lack of beautiful 2D cutscenes). And while I do like Kamiko and find she's a good foil to Lo Wang, she's definitely not as compelling a companion as Hoji was.
What I think is missing in SW2 is some focus on Lo Wang himself: in SW1 the backstory was tied to Hoji, but the actual story told by the game was Lo Wang's, showcasing his growth as a character, from sarcastic thug to honourable (if reluctant) hero. I haven't reached the end yet, but SW2 never quite manages to tie Lo Wang as a character to the stuff going on around him, you know what I mean? Lo Wang is essentially there to advance Kamiko's story. I think they should have played his vendetta against Zilla more, that would have given him a stronger motivation as well as a story arc of his own. They're keeping that for Shadow Warrior 3, I guess...
But I believe the gameplay is generally better, although I miss the marks awarded for style at the end of battles, and the "randomized" environments, while they look pretty cool, do become redundant after 20+ hours.