Overall The second Inuyasha movie was definitely better than the first. It is more closely related to the series in that Naraku and his gang actually show up despite the entire movie being a side plot.
The movie is more intricate and the story more involved than the first movie. Despite having an average story for a movie (though slightly better than the first movie) it was still a fairly enjoyable watch.
Animation Superior to the anime and equivalent to the first movie. Animation quality in superb in terms of movement and action rendering but drawing style is still not as clean as current to-date animes.
Sound Same Inuish BGM. If you liked the BGM in the series, you'll like it here. Otherwise, nothing that special. Voice cast does a great job as expected.
Story The story has many more plot twists than the first movie and there are actually tense moments. Luckily, the story avoids the David-Goliath epic battle that really ruined the first one for me.
It starts with the Inu gang fighting and defeating Naraku. That was awesome because we get a glimpse of what the characters would feel/do once they defeated Naraku (a pleasure which we never get in the actual TV anime). However, a dormant demon awakens named Kaguya who has powerful abilities that rival that of Naraku. Thus we have another epic battle to save all time.
While there are some original plot twists, the general flow of the story is not that new and the conclusion is, well, there is none. They just walk away at the end of the battle and that's your conclusion.
Character There is actually character development in this movie (Kag & Inu to be more specific). The two talk over the issue of Kagome liking Inu as a hanyou and Inu's eventual goal to become a full youkai. Though the other characters are relatively static, there are still interesting interactions between Hachi & Miroku and Sango & Kohaku. Kikyo also shows up but for a minimal role.
As for the villain, she wants to stop all time for some reason while also wanting Inu to become her servant as a full demon. Expect a bit of drama when this issue comes up. The villain is much less linear than that in the first movie but it would have been better if there was more background on her.
Value Overall the movie was more enjoyable and engaging than the first movie. However, it was pretty much average in intensity. The character interactions and plot twists help make this one more enjoyable than the first movie but once you've seen it once the plot twists become pretty linear and so re-watch value isn't that high (unless of course you want to see that one scene between Inu and Kag which doesn't exist anywhere else in the series ).

Now for my rating

Animation - 8

Sound - 8

Story - 6

Value - 6

Enjoyment - 7

Total - 7 okay