The battles are better in regard to not simply being whack-a-mole, but it can still be played as such. Counter especially can be both aggravating and very helpful. Perhaps it was simply the way I built Auria, focusing on strength, defense, and HP, but I usually didn't need her other abilities, nifty though they are. My playing style was typically hit them hard and fast, usually have Zaqris along to heal if needed.
No battle was ever actually frustrating anymore, though some where still plenty intense.

Way more characters this time around. It was nice to be able to talk to all of them and get their opinions on the area or other topics. I suppose my favorite was Vanquish, though there wasn't actually a lot of dialog with him. But what dialog there was tended to be very thoughtful, intelligent, and showing a common sense most other characters seem to lack. There's also nicely little characterization scenes where we get a good look at how some of the characters see the world. I wish all the characters were included at the end game scene, as it was a nice little nod to either how all of them are on the inside, or how Auria sees them. I'm leaning more towards the former, given what they say, though I guess the latter would make more sense.

Now, here's where I'm going to have to be harsh. There is definitely a general lack of good character chemistry. The high points were Auria and Mia's little scenes and Seri and Zaqris's ending scenes. Other than that, most of the character interactions did not seem to make a whole lot of sense. Ray is constantly referring to the other's as his friends, when everything they've said to him has been some manner of insult of cutting joke. Perhaps this is simply supposed to be the kind of person he is, not really understanding people to well, but this never really comes across, especially giving the conclusion to Auria's outburst. His relationship with Vel also seems rather shallow, mostly because it is never really addressed. Why do they like each other? What draws them together after only one day, as Auria points out?
Blaise and Rein tend to come across as more believable, mostly because they're supposed to be emotionally distant and generally distrustful of the others, or in Rein's case, having a general lack of caring about the others. So lack of proper dialog and emotional chemistry tends to help, rather than hinder, their characterization.
Vanquish had little characterization, though I'm not sure if this is due to me going to Ciel last. I went back to check other places, but except for Viadahn, he has noticeably less dialog than everyone else.
Vel is... I don't know. She also lacks some characterization, and none of her questions are answered, though I suppose they will simply come up later. Her little stunt at the beginning of Boris Island and her actions later seem to make little sense and it is odd how they come to trust her so quickly. She does help them in the end, but again, this is not explained. Guess I can't honestly complain about leaving plotlines dangling in a cliff hanger, though, so I reserve judgment.
I suppose my biggest problem is with Ray and Auria's little dialog at the end. Frankly, Ray acts like an ignorant idiot in killing Mia, refusing to ever listen to Auria's protests or even acknowledge them. And then we he does say he killed her for shamelessly selfish reasons, Auria doesn't seem to care. Auria, for her part, has never even given Ray the time of day in her best moods, and in her worst, insulted and ridiculed him. Now, she has a point with him being basically the only open person in your party. I feel that if this had been properly addressed earlier, their interaction at the end might have been more believable. She seems to forgive him way to easily. And, of course, her feelings come out of left field, given her previous attitude towards him, as I mentioned earlier. No, I suppose that's not entirely true. I always suspected it would happen, but not for any good reasons. Mostly just because it's simply what I've come to expect after years of playing RPGs. You know, cause it was cliche.

Now, it's not all like this, mind you. The Barette Temple, annoying as the party breaking up was (at least I was given fair warning), it was also the height of the game's examination of morality and responsibility. Honestly, it's the only time I've ever seen this sort of thing done in a way I actually thought made sense and agreed with. You could play along with what Kasch wanted you to do. Or you could not do so. Not even something that simple is usually done, in any media really, even though this "third" option tends to be popular in other situations. So, I chose to call him on his bullshit and attack him. This situation is something I've thought of quite a bit. And in the end, what you chose doesn't matter. They may be using you as an excuse to kill people, but you're not the one killing them. They are. They don't have to, but they chose to anyway (or not, as they case turns out to be). You maybe a link in the chain, and should do everything you can to stop people from being hurt due to you, but in the end, you're not the one wielding the sword/demons. They are.
And though she was being a royal idiot (Hah! Pun!), the end game did more for Seri and Zaqris characterizations than anything else. Seri was always an idealist, but she let that blind her to the consequences. All her ideals and views aside, joining the Virad was a really boneheaded move. Based on what the Virad have done, what did she think was going to happen? So, her plan falls apart, and she is forced to confront her enormous mistake. It also made me like Zaqris a lot more. He's still a bit of a jerk. But he's at least a thoughtful one. And I can really respect his views and dedication to his country.
I was also suitably impressed with Orka. It was more otherworldly, despite also being more modern. Ironic. But it's a city built in levels and into a canyon. That's. Awesome. Wish I could have spent more time there.

First off, what order did you beat the three areas (Viadahn, Barette, Boris Island)? The order in which you did them affects which interlude scenes you see.

There is a scene which makes Auria's feelings clear, but you can only see it if you do Viadahn after Boris Island. I guess that wasn't a smart move on my part. What I was going for with Auria isn't that she necessarily likes Ray, but she feels jealous of Vel. Auria doesn't have very much self-esteem at all and Vel's attractive appearance combined with her friendly attitude makes her feel very insufficient. It's not a case of her personally being attracted to Ray, but rather that she doesn't want to lose to Vel. This was hard to get across since the time in Act II when you get Vel can vary (and, in fact, you might not get her until the very end).

Regarding the relationship between Ray and Vel, this is addressed in Act III along with the questions surrounding Vel in general. Act II had so much information that I needed to cram in that a lot of subplots were put off until Act III so as to not inundate the player with exposition. This is especially evident with Vanquish; his entire story gets pushed off until the next game.

I'm glad you liked Viadahn; making it was what took the longest of anything in Act II.

I do suppose most of the problems I have mostly come from the story not being completed yet. Guess I'm suffering from cliffhanger syndrome.

Hmm... I did do Viadahn after Boris (did Boris -> Viadahn -> Ciel) and did see that little scene with Auria and Ray & Vel. For me, she came of as more of a prude than anything else.
Your explanation of her mindset does fit rather well, too. One thing this game does have going for it is that the characters tend to come off as flawed, but not in too annoying a way (yet, anyway). Auria especially can be lousy with this characterization, but also makes up for it with being a bit more sensible than most.

I can totally understand issues on stuffing too much subplot into one Act. It's always a problem to try not too overburden the game with too many different plots and cutscenes. Afterall, even RPGs are still games, and while plot is expected and demanded in the genre, the player still needs to be able to do their own thing. And the aformentioned keeping in mind of the games place in a series of Acts also helps.
However, it still seems like, even if some plotlines need to be left until the next Act, some other things that involve the main plot growth should be expounded upon. Especially Ray and Vel's relationship, considering the impact it has on Auria's outburst at the end. Doesn't even have to be too much. It could be installed while in Svaneholm between areas. You could, for instance, have Auria see Ray and Vel out on the town and eavesdrop on them (seems like the sort of morally dubious thing she'd do). And giving a little closer look at their interaction would also tie in nicely with not revealing Vel's backstory until the next Act. It's hinted, and slightly more strongly than that, several times that Ray "never new the real Vel" and this is a good way to keep with her lack of backstory in Act III while still making it move the plot along.

I don't have much advice to offer on gameplay. With the expanded cast, battles can be much more varied. I've also made a couple comments about this topic in my Beta Test Report.
One thing I would like to mention is more general advice for plot than a specific point: If Act III is going to be set up like Act II in the non linear department, make allowances for character specific conversations that maybe missed. For example, the Ray & Vel thing you mentioned, you could have had other similar scenes that would play out in the even that Boris Island was done second or last. Especially considering how most of the cast tended to have the same conversations at Savneholm, with usually no changes. This could be mixed up a bit by having them respond to what happened in the area you just finished, or even having them have conversations with each other, which would address my other problem with character chemistry. None of these things really need to be cutscenes or take up that much time, so this would have the added bonus of not bogging down the gamer in too much plot.
Of course, if Act III is mostly done, most of this may not really be feasible, though I think the latter idea watching two other cast members have conversations might be easy enough to stick in.

Unfortunately, the bit about Ray and Vel's relationship is one development that absolutely can't come any earlier due to some events in Act III. However, there is something that foreshadows it (albeit in a way you might not be able to connect yet). If you do Barette as your first area, you'll see a scene after beating it that relates to this subplot.

Also, I know you've been inundated with helping me lately, but if you want to (and have the time), I'd be happy to have you beta test Act III. The only things really missing from it are some graphics and the vocals for the ending theme.

Basically, the order I played through Act II was: Boris Island => Barette => Mia's scene in the warehouse => Orka.

After viewing the cutscene at the Manor, I was returned to Svaneholme where I rested in the bed at the private eye's home. After that I received no new dialogue and was left with no idea what I should be doing. So I explored literally every single area (Including Svaneholme) and spoke to everyone I could. The only new dialogue I could find was Rien's discussion about Vel and that didn't lead into any new content, so I assumed I'd run into a bug.

Only after about an hour of this did I think to rest until night and then explore Svaneholme. After finishing the content in Orka, I was immediately placed next to a bed at night. Therefore I assumed the implication was that I should rest until morning. But this just confused me and lead to me wandering around aimlessly when the solution was really simple. I felt really stupid when I realised the answer was so blindingly obvious. xD

By the way, I just finished Act II and the ending was absolutely incredible. o.O I was genuinely impressed by it; it's not often that videogames are able to stir an emotional reaction in me... But yeah, those closing scenes managed it. Well done.