From what I've seen, 1.0 had a lot of needless detail, and ran on a pretty poor rendering engine. So it ran poorly and looked bad. Terrain textures did have better quality, but when you've just got the same models and textures hewn across the entire landscape you don't have to worry about memory usage.

I'll remind everyone that good cutscene coreography is not 'graphics', too. That cutscene with our badass Admiral would work just fine in 2.0 - but her face wouldn't look awful and the lighting wouldn't be washed out. The problem with 2.0 is that nobody on the team gives two shakes about cinematography; When one considers the amount of time they had to make a completely new storyline, though, I wouldn't blame them.