I think the biggest killer for the game for me is the NPCs and how they never cease to remind you at every turn that they are, in fact, NPCs.
In Fallout 3, yeah, the NPCs are a bit stiff, but other than that, I find myself actually caring about them because the dialogue for each NPC is generally different and any key NPCs have unique personalities which generally make me empathize with them.
In a single player RPG, the NPCs had damn well better be believable because they're the only thing tying you to the game's premise that it's a fantasy world and should be treated as such. Games like WoW have terrible NPCs but it doesn't matter because you're ass-deep in other players anyway.
But Fable 2's NPCs just can't seem to emphasize enough just how much they're not to be taken seriously, and it's pretty much impossible to care about a world filled with "people" like that.
It's really a shame, because had they focused less on having plants grow in real time and focused more on making the NPCs at least SOMEWHAT believable, the game would've seriously benefitted.