The characters from LR1 look better/different because that used Honey Select, LR2 is like Blender or something equally free. I agree they looked better, but definitely generic once you see some other games that also use Honey Select, and so hilariously shiny they look like the characters were shrink-wrapped. But yes, game loops in LR1 much simpler. However, simpler game loops also reduce chances for game growth, can really limit final game product.
LR2 deliberately has a more complex game so that it can also randomize introduction of randomly generated characters, instead of LR1's exact set of 5, AND ONLY 5! Don't get me wrong, I agree that at some point Vren gonna have to add some more characters models (fat and crazy muscular at a minimum, some peeps are into that stuff). But that is kinda scut work, since so many blobs to move around (ie, no skeletal system for character models, as far as I can tell). And yes, the faces do look ridiculous. Maybe not like feet, but barely like faces...