Keep in mind Fable II is not an open-world game, nor was it billed as such, so I don't think your expectations were properly calibrated. That said, there are about as many loading screens as in Oblivion; where that overworld was one big area, at least there's no loading every time you walk into a house here.
There is a LOT of backstory to the quests and places, so I just don't think you're paying attention there. The people talk about it, it's in books and notes, it's all over the game world; many of the side quests flesh them out. It actually reminded me of Oblivion in how they fleshed out the history of the world; I think they were taking notes.
Fable 1 didn't have any of those "problems" you listed - no dungeons, no meaty side-quests, nada. I liked that this game gave me plenty to do, with many side quests opening up as the main one progressed, and some of them quite large (the one involving Lady Grey is a HOOT). And there's a lot of other things to do along the way: The silver keys/chests, Demon Doors, Gargoyles, statues. Or the recurring side quests of Assassination, Slaves, Civilian Displacement, Bounty Hunter. I think Lionhead was hoping at least some of those would appeal to everyone.
They've buried payoffs in the different aspects of the game. I became a real estate whore in my game, and found that there are a half-dozen unique buildings in the game, and they all have little quests attached to them after they are purchased. And the NPCs started started giving me shit for owning so much property (and for my rent prices). I decided to have a kid, and when he grows up he runs off and gets into trouble, leading to a side quest or two (before child protection services took him, alas). I only opened two Demon Doors, but they were a hoot to get into, and I'm going after all of them on my new game. And for every area of straight paths (Bandit Coast) there's a large open region (Bower Lake, Oakfield, Brightwood).
For every nook and cranny they put into the game, there's some payoff or interesting detail waiting there. Right now I'm playing through a second time, this time as a good hero (and a woman), and I just discovered how Bowerstone Old Town is completely different now; I was utterly surprised. The whole house/family part of the game isn't for everyone, but it oddly clicked with me late in my game. I'm going to marry some fine young lesbian early in my game and treat her right.
Anyhoo. Some elements of the game are quite conventional, but not all of them. And the conventional content is there was executed pretty well, I thought. And the real meat of the game - the combat and leveling system - are superb.