It's amazing what a year can do. The original Divinity 2: Ego Draconis was released in 2009 but suffered from a general lack of polish and unfavourable comparisons to genre-companion Dragon Age.

One year on and with a hefty lick of paint and an expansion pack Divinity 2 returns and this time deserves to gain a far wider audience. It should at the very least appeal to RPG fans looking for something prettier than Fallout 3 and more expansive than Dragon Age.

Dragons? Knights? Vengeful flames? Yes, we're very much in classic D&D territory here and Divinity 2's old school credentials are clear from the off. A hackneyed fantasy story soon sees you choosing between a warrior, priest, mage or ranger. Then it's off into the world for swordplay, sorcery and smooth talking. OK, the latter is spoilt by some poor voice acting but there is far more to this game than flaying ye olde goblins. Mind reading – a neat ability to gain new quests or find otherwise hidden items – for a start.

On the whole though Divinity 2 follows the standard RPG template of combat, questing and exploration and does so with surprising panache. For example skills can be flexibly applied to your character allowing you to mix some nice mage spells with, say, ranger archery.

Once you are out in the world you have relative freedom to explore. Venturing off the beaten track almost always rewards the player with a dungeon to loot or a quest to solve. At the very least there will be enemies to defeat and often tough ones too. Divinity 2 doesn't hold back in offering a challenge. Grinding – killing enemies in hefty numbers – is essential to complete some quests. A lack of quest markers or hints is similarly old-school. Many will be put off by this but it is refreshing to find a console game that doesn't treat you like the Xbox 360 is your first experience of gaming.

The lack of handholding generally will make you despair or smile, probably depending on your age. Older gamers will enjoy a nostalgic – if occasionally painful – trip down memory lane as regular saves are needed to avoid losing progression. This is a long way from the glowing trails and forgiving combat of the Fable games. Generally though it works. There are some overly obscure objectives at times but finally finding a hidden tower in a valley feels much more satisfying than simply following a breadcrumb trail.

Once you put some hours in the game starts to open up with the ability to take on dragon form. New enemies and quests now take place up high. On the ground the action continually gathers pace and the original game alone is likely to take 30-50 hours to complete. The expansion pack promises a similar amount. You may get frustrated at times by some tricky foes but you won't feel short-changed by this game.

Then there are the graphics. The character visuals may disappoint but the landscapes are beautiful. Yes, we're talking classic fantasy/medieval but the green hills, dark forests and rugged mountains are a pleasure to explore.

Downsides? Not least the lengthy loading times that occur as you leave houses and dungeons. 30 seconds is not unusual. The plot is hardly a classic too. Despite this there is much to love here. Traditional it may be but Divinity 2 Dragon Knight Saga is an excellent RPG that is up there with the very best on the Xbox 360.

• Game reviewed on Xbox 360