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The first time I played them, yes. I played them right after each other on the PS2, and GoW2 was not as good as the first one. Not a huge decline, but a disappointing one none the less. Then I recently replayed them in the GoW Collection, and I felt exactly the opposite. I almost had to drag myself through GoW1, whereas GoW2 was rocking my world (even though the story still went overboard towards the end). I don't know why, but that's how it is now, and so, GoW2 > GoW1 for me right now.

EDIT: Damn it, I guess my reply isn't meaningful then. Yes, there was a definite decline in story and character development, though it wasn't an issue for me until the end of GoW2, where it started twisting waaaaay too many things to fit the story.