I couldn't have said it better myself. KOTOR is what the prequels should have been. It was grand , it was fresh, it was exciting, it had a believable love story/interest and Malak added that sense of foreboding evil/malevolance that was missing in the prequels. What an awesome game and awesome story. If bioware ever gets off its ass (unlikely), returns and finishes the trilogy you could almost do a trilogy based on the games, this time however instead of the trilogy focusing on the redemption of Vader it would on the redemption of another Dark Lord of the Sith.
That was actually done on purpose. The whole game is full of homages to The Original Trilogy right down to the opening scene. Malak was created specifically to remind people of Darth Vader.
Actually they are making a third one. It's a MORPG. More info on it here:
http://www.swtor.com/
Granted KOTOR II wasn't nearly as good but it still had redeemable qualities.
The main problem was that Lucas Arts wanted to cash in on the popularity of the first one so fast that they put it out before they were done with it. Bioware didn't work on it as they wanted to work on their own properties at the time(Jade Empire, Mass Effect). Which is why parts of the plot at the end are so out of sequence and confusing. There's was a fan project online dedicated to restoring most of the cut material called The KOTOR 2 Restoration Project. But I don't know how successful they were.