Yes, the rings are alien the last time I checked, but they might as well been magic. He would have been very different kind of threat. The writers did a good job about setting up the Ten Rings terrorists in the first movie, but for some reason they didn't do anything about it in the sequel.
Iron Man 2 works better if you think of the villains of the movie as Tony's drinking problem and how he deals with the fact that he is going to die. Whiplash and Hammer are there because this is a superhero movie and they are there for Iron Man to punch. They are the least interesting things about the movie for me.
For all the Avengers complaints, Nick Fury and Black Widow did end up having a point in the story. Fury pointed Tony to his father's research and Black Widow helped shut off the hijacked War Machine armor.
At least this movie has no truly horrible scenes like in Spider-Wan 3, like Peter doing his stupid dancing and the writers making Sandman the person that killed Uncle Ben.