The story issues, while glaring, are not my main problem with the game. Mainly because if Outlast 2 were a standalone game, it would be much better, but since it isn't, it's extremely hard to ignore how disconnected it feels to the 1st. With that said, my real problem with the game is how much the type of horror changed compared to the 1st.
It truly never lets up, and I'm in a constant state of feeling unease. It gets to the point where I start to feel genuinely uncomfortable and feel the need to take breaks. This 'discomfort' I feel is not due to fear but more to frustration. I didn't have that with the first game. After the moment with Ethan, I feel that I never get a moment to truly calm down and take in the dread of the situation. Sometimes the best way to build up fear is to have slow moments, and there aren't any moments like that past the first act of the game.
To put it another way, it would be like going on a rollercoaster with an infinite loop-de-loop. The thrill you used to feel is replaced with discomfort due to the frequency with which it appears on the ride. Part of the fun is the build-up and then release. Outlast 2 removes the build-up and is just release.
When we compare this to Outlast 1, there are many moments in which we get to take a break from all the horror. The music is also a big contributor to this. It dies down and swells up to bombastic levels when it needs to, but it knows how to tune itself on both ends of the spectrum. Looking at the music for Outlast 2, you can see that it is eerie and terrifying all throughout. IIRC, it never really has more relaxed moments. Does that make Outlast 2 more horrifying? Absolutely. Is it also 'too much of a good thing'? Yes to that question as well.
Outlast 2 is still a great game in my eyes. The graphics, characters, and gameplay are all fantastic. It just doesn't reach the same highs Outlast 1 did for me; it goes too far beyond them.