The story is tied decently to KotOR1, but I guess it all depends what you were hoping to see.
Sure, many of the KotOR1 people were sorely missed, and I did miss a continuation of the story, rather than more of the same. Yes, they do manage to somewhat explain the mandalorian wars and the jedi civil war that followed, but it just leaves way too many questions unanswered.
There are many good things about KotOR, and if you look on the story independantly of KotOR1, it has alot of potential. It's a shame the potential is crushed beneath deadlines, needed ties to KotOR1 and in general a feeling of obsidian not knowing where they wanted the story to end.
All in all, I like KotOR2. It's not as good as KotOR1, but I think it manages to pull off a decent follow-up, despite many of the other expectations I myself, and many others, might have had for it.
I'd like KotOR3, if they make one, to summarize on KotOR1+2. But I think it might be better for them to conclude the stories of 1+2 early in the game and then give the 3rd an independant path, or a path taken due to the consequences of 1+2.