IIRC, II was considered superior, where a lot of the ideas were supposed to have matured and gelled to create a compelling experience. I didn't own a 360, so I never got to see for myself, but I did get to watch a few hours of gameplay while hanging out with my boyfriend at the time.
A notable moment: he'd unlocked a Demon Door and was enthusiastically laying out how the game's real estate system worked, and his plans for the idyllic winter lodge he'd just found, when he walked his character inside and... well, I won't spoil the surprise. Suffice it to say, someone on the design team had a very good handle on what they were doing. It's always stuck out to me as an excellent example of how deeply game designers understand their systems, how those systems influence gamer behavior and expectations, and how to play on those expectations for emotional impact.
(You should probably spoil the surprise, because few of the readers of your comment are going to track down & buy a 16-year-old RPG, and spend the necessary 10 or 40 hours to reach that point and learn what the surprise is and how it illustrates anything of interest about the Fable games.)
I feel like that's a bit reductive. The jump-scare is only effective because of the expectations set by previous experience. As the wiki article mentions, it at first seems like a winter version of https://fable.fandom.com/wiki/Serenity_Farm. Once the illusion is broken and you begin to leave the area, you're forced to pass by and see how all of the cozy elements that built your initial impression were transformed. And then, of course, nothing is explained; you're just left to ponder what happened. Describing it, or even seeing it divorced from some amount of contextualizing gameplay, doesn't quite convey the quale of the moment. It sobered us up in a way that I can best compare to the feeling of walking out of the atomic bomb museum in Nagasaki.
I appreciate when games are confident enough to play these sorts of tricks with players. I'm also reminded of the Pitioss Ruins in Final Fantasy XV, a secret dungeon that also messes with player expectations and emotions by using your understanding of the game's mechanics against you, while also using the environment as a monumental storytelling device (in this case, your journey through the ruins serving as a metaphor for the game world's lore).
In that era of gaming, just waiting a few years meant sequels were better just due to extra computing power, so yes, Fable II was better in most ways (although I'd argue the main story was worse). It was still trying to define many gameplay mechanics that are just standard fare for western made action RPGs. One can play Fable and Morrowind, then look at Skyrim, and see how it owes about as much to Fable as to Morrowind.
It's harder now, because so much of the genre seems to have frozen. The graphics are many times more realistic, and animation blending has come a long way. But ultimately making changes is now so much more expensive, that significant novelty is difficult to find in games that also push what could be done, the way it was back when the first two Fable games could try to push ahead in all direction at once
I think Baldur's Gate is as much to blame for this - that was really the origin of these high-touch, narrative-driven, asset-heavy games, especially with voice acting. It completely demolished the keyword based interactions of the Ultima and Wizardry games, almost completely removed wilderness exploration as an option in RPGs, and turned them into very curated experiences. As much fun as Morrowind was, it was still a disappointment to me coming after the vast sandboxes of Arena and Daggerfall.
It's more Baldur's Gate 2 that's to blame. The original still has plenty of wilderness exploration, and while the main quest is linear, there's no real urgency to following it. You need to pay attention to figure out what to do next, and it's possible to go the wrong way and wander into encounters much too difficult for your character. The NPCs are lightly characterized archetypes with minimal dialogue and no romances. I think the original Baldur's Gate still retains the spirit of the older style of RPG.
But BG2 is actually a bigger game IMO - yes, in BG1 there are a lot of areas where you can just wander and explore, enjoy the game atmosphere; there are only enemies, sometimes a simple quest, or a cave, etc. - but in BG2 while there are fewer areas, there usually have a lot of content, so you spend more game time in them.
I'm disappointed in rpg's now. Once oblivion came out, they all seemed to stagnate and just be clones of that model.
The problem is the market for a deep, deep rpg with skills based on time spent using them is probably pretty small. Because it's people like me who don't actually have the time needed to play them due to life nonsense.
I desperately want the mechanics of Morrowind, but with modern graphics. The original is almost unplayable because of how crappy the graphics are.
I liked Fable 2 well enough, but I think that the first game was far superior. The story is pretty interesting in the first game (if basic), whereas in 2 I felt it was kind of a mess.
A notable moment: he'd unlocked a Demon Door and was enthusiastically laying out how the game's real estate system worked, and his plans for the idyllic winter lodge he'd just found, when he walked his character inside and... well, I won't spoil the surprise. Suffice it to say, someone on the design team had a very good handle on what they were doing. It's always stuck out to me as an excellent example of how deeply game designers understand their systems, how those systems influence gamer behavior and expectations, and how to play on those expectations for emotional impact.