Diablo, all the way. There are a few things that I think Diablo nailed and that the sequel lost, not because it was a badly made game, but because it lost sight of what made the original a success and chose to focus on the wrong elements in pimping out its "bigger and better" gameplay. As far as sequels go, it was exactly what it should have been, but that is also sort of the problem in itself.
First, there's the difficulty. Diablo is a reasonably difficult game, but it's difficult in a very measured sort of way. It punishes stupidity very very quickly (running into a pack of enemies vs. drawing them out and using choke points), and it always feels fair whether you win or lose. No random arrows and spells flying around to hit you as you run away, no cheapass bosses that require you to run in circles for a half-hour, no portaling back to town over and over to stock up on potions. Diablo II felt more geared towards online play due to the number of enemies, the cheap shots and random deaths increasing reliance on other players, and so on. It had less a "you died because you screwed up" feeling and more a "you died because the game wanted you to die" sentiment. That emphasis on absurdly difficult and bloated enemies also hurt things. Diablo II was largely an exercise in strategic use of town portals and drinking potions; Diablo was more concerned with endurance and how to tackle encounters themselves. It made more sense from a multiplayer and mass market standpoint to do what Diablo II did, but I don't really like it either way.
Second, there's loot. Most of your time in the original game was spent outfitted with normal items plus a few decent magical ones, if you can find them. Uniques were extremely rare, comparatively, but stood out as being not just more powerful, but also having upsides and downsides to them. Uniques felt like powerful, ancient artifacts with special properties to consider, with risk and reward, not just better versions of gear you could already find. Diablo II conflated the problem even more with set items, crafted items, runeword items, rare items... it got excessive and the boundaries between different tiers of loot broke down. In the original Diablo, you could find a good item early on and use it for the rest of the game; in Diablo II, loot was largely disposable outside of its online economy. Torchlight, Titan Quest, and Dungeon Siege all inherited the worst qualities of Diablo II's loot, showering the player with it and simultaneously making it almost entirely useless. Loot in RPGs should be about trade-offs, with occasional really cool items to spice things up, and not about selling junk to vendors so you can... uh... gamble it away on more junk?
Third, Diablo was focused. Though it had less variety in environments and enemies, those that were in the game felt like natural extensions of one another, progressing in severity and getting darker and darker with each level down the hatch. You had one central goal and everything in the game revolved around it. Side-quests were minimal and incidental, and not necessary to slog through before the game decided to open its doors to the next chapter, unlike Diablo II, where the game would present a bunch of "optional" quests per act only to reveal later on that they were all actually mandatory. Its grab-bag "world tour" of locations also felt forced to me. Diablo was a game about claustrophobic tunnels and dark depths, not about jungles and deserts. It had its moments (the Mayan-style tombs were great) but it tried too hard to impress.
Fourth, Diablo was about steady progression towards an objective, and not about grinding. Though there was leveling, spellcasting, new gear to find, and so on, it was all in service of the greater objective of winning the game. Harder difficulties and online play presented a greater challenge and required more metagame knowledge to succeed in, but even there the focus was largely on smart play rather than just maxing out your character or trying new builds. Diablo II turned that around and made its hard difficulties not so much more difficult as it did simply increase the barrier of entry. Want to play on the highest level? Be sure you've worked your way up to level 60 before even trying (the word "work" is very appropriate here), and you have to have X character build to stand a chance. I never found those levels difficult so much as just tedious and repetitive, a test of patience in grinding and not in ability.
Fifth, randomness with purpose. Diablo was heavily inspired by roguelike games and as such, reveled in its random selection of quests, items, and so on. Shrines could give permanent positive or negative bonuses, sometimes you'd find a boss and sometimes not, and sometimes you'd get a great item early on or sometimes you'd have to wait most of the game. This lack of predictability ensured a lot of interesting repeat play. However, that randomness was more articulate than just a series of modifiers selected from various loot and monster tables - the experience you were left with was specific enough that it was memorable. The Chamber of Bone, the Butcher, King Leoric, the poisoned well, the Archbishop, and others all stood out because there were only a handful per play-through, and they were all distinctive. Diablo II tried to replace that feeling of hand-crafted encounters with boss monsters featuring X, Y and Z properties, rare items with 10 different effects, and so on... but it just could not compare to Diablo's more thoughtful approach. It's the same issue that games like Daggerfall run into - huge game worlds with limitless potential, but nothing memorable or distinctive at all about them.
Sixth, and probably the weirdest complaint, is running. The ability to run, in Diablo II, was widely praised and Blizzard were congratulated by their fans for its inclusion, as it cut down tedium in getting place to pace. Personally, I think it undermined a lot of the balance in combat, and had additional effects on the gameplay that were for the worse. The fixed movement speed in Diablo meant that you had to be very careful about how you tackled a given situation, and ensured you were punished if you were stupid. In Diablo II, running completely changed how the game played. Instead of punishing you for bad play, it required you to simply retreat and hop through one of your infinitely-available town portals. Combat became less about tactical positioning and resource management, and more about kiting HP-bloated enemies and running circles around them while firing off abilities every few seconds, quaffing potions the whole time. Environments were larger to make up for the increased movement speed, often to their detriment, as it meant longer stretches of nothing to do or, worse, more repetitive enemies to grind through. This in turn led to more junk loot to sell, higher XP requirements to gain levels, and so on. It's one of those "it sounded good at the time" ideas, whose effects were felt throughout the game, and the rest of the mechanics weren't able to compensate effectively.
This isn't nostalgia, by the way. I only ever really played the original Diablo after I'd got my fill of Diablo II. I never missed the multiplayer duels, the boss grinding, the magic finding, and all those other rote, repetitive tasks that defined Diablo II. The expansion was also a lot of fun, but pushed things even more towards modern MMO design and multiplayer. Diablo II is, in many ways, still an excellent game, a genre-defining one, and the perfect sequel, in that it takes the distinctive elements of the original game and expands on them in interesting ways. At the same time, it also lacks that very same tight focus that made the original Diablo so good, its focus on multiplayer, repeated play, and impressive graphics ultimately undoing a lot of the first game's finer points.
