Apologize in advance, but I'll write this as if you hadn't play the first game for the sake of any reader that hasn't and to help me explain the plot better, as the game actually relies quite a bit on DD:DA for its story. I'll also use DD1 when talking about the base game, and DD:DA when talking about the expansion
In DD1 it is stablished that the universe of Dragon's Dogma is composed of infinite worlds, all trapped in the cycle that gives the name to the games. A dragon appears, wreaks havoc and chooses an Arisen. The Arisen then challenges the Dragon. If he loses or refuses to fight, that's it. But if he wins, then the path to the godly figure that watches over the cycle, the Seneschal, is open. If the Arisen dies fighting the Seneschal, he becomes a Dragon, seeking new Arisens. But if he wins, then the Seneschal grants the divine sword, the Godsbane, to the Arisen, who uses it to end the Seneschal's life, granting him rest and taking the mantle of the Seneschal until a new Arisen reaches him. Is important to note that there are multiple Arisens and Dragons in the infinity of worlds.
Another very important fact is that Will is power, be it in the form of courage or ambition, only those of greater will are able to become Arisen and rise to Seneschals, and those that not end up in defeat, losing their wills.
In DD1, you can ask the Seneschal if he is God and about the origin of the Dragon's Dogma. He answers that he isn't a god, despite his power, and he doesn't know if there is one, and that he doesn't know when the cycle started or why. In DD:DA, if you beat BBI for a second time, you will come to face what is known as the True Daimon, a being using the demonic body of Daimon, but with a dragon's face on its chest and a completely different and ominous personality. Once you kill it, a human figure will appear before disappearing through the Rift, which implies that, whatever the True Daimon was, is alive and has power over the Rift, which means it is incredibly powerful.
This misterious figure is the main antagonist of DD2, the master of the cycle and the closest to a god the setting has: the Pathfinder.
The Arisen of DD2 is able to break the cycle thanks to three key players: The Seneschal Rothais, the new Dragon, and Lord Phaesus
In DD2, we discover that we are actually in the first world of DD1, just uncountable cycles after the first game. In this cycle, the main players of said cycle, the Seneschal and the Dragon, are both tired of the world being trapped into this eternal repetition, and both rebel against the Pathfinder. The Seneschal, Rothais, first king of Vermund, has been the Seneschal for a long time now, killing every Arisen that has come his way instead of testing them, refusing to do his duty as keeper of the cycle or let someone else take the throne. For his part, the Dragon, which was stablished in DD1 and DD:DA to be unable to control its actions, still has a mind of his own and now is playing his role half-heartly, instead trying to make the Arisen see the true of the Dragon's Dogma and break the cycle instead of perpetuating (which is what his speech when you are on his back is all about and why he says "You are too late" when you arrive at the battlefield, as he wanted to avoid the fight as it would perpetuate the cycle).
As for Lord Phaesus, is relevant to answer the next question:
Why all the setup with conspiracies in Vermund and Batthal when they end up going nowhere?
The thing about the story is that the conspiracies in Vermund aren't actually the meat of the plot. Disa's scheming is, for the most part, irrelevant, even if it is our main motivation to regain our throne for most of the story. The point of almost all main quest in Vermund's, and even some sidequest's, is to learn about Lord Phaesus, the secondary antagonist, the real mastermind behind the first half of the plot and probably both the real "hero" of the pre postgame of the story and one of the main agents that allows for the cycle to be broken. Doing quest you learn that he is in cohots with Disa, he is the man that granted her the curse that made you amnesiac, he has been experimenting on the populations of the Slums, kidnaping pawns and even sent spies to monitor your activities. This is because Phaesus main goal is to break the cycle, and the only reason he cooperated with Disa, who on her own probably wouldn't have been able to stop you, was to prevent you from assuming the role of Sovran, seek the Dragon and continue the cycle anew before he was able to devise a means to control the Dragon to stop the destruction and put an end to the Dragon's Dogma.
For most of the story, we are actually playing under the Pathfinder hands, who wants us to regain the throne and continue the cycle, unaware of this very fact. We are technically speaking the "bad guys" of the first half of the game, just another pawn of the cycle.
Phaesus would fail in his attempt to control the Dragon despite all his planning and the crimes he committed, yet his effort weren't pointless. It is due to his intervention, by derailing the cycle so badly that the Pathfinder is forced to intercede, that the cycle is finally broken even if it isn't how he envisioned it. Because the Arisen has loss his memory and a false Sovran was in its place, the Pathfinder had to guide us and try to fix the cycle as best he could. He was forced to take the risk of us meeting the Seneschal Rothais and he granting us the Godsbane, which we would require to persue Phaesus and reach the top of the Moonlight Tower, were our confrontation with the Dragon would begin. But is due to us having the Godsbane before even defeating the Dragon or becoming Seneschal that allows us to break the cycle. Also it helps that the three of them drill into our heads that the cycle must be broken, which is the reason we persue the Pathfinder even after becoming Sovran, as it means we are not happy with just playing our role either.
After doing so, the Pathfinder is going to destroy the world and start the cycle anew. If we die and fail, he would punish us by trapping us in the next cycle in the place of the old man, unable to do anything but watch as the cycle continue. We suceed in stopping the end of the world, which forces the Pathfinder to take matters into hands and shows his true form: that of the real Dragon (which has the same face as that of the True Daimon back in DD:DA). He explains that the world and the dragon were born from nothingness, and that the cycle was created for fear of the world returning to nothingness eventually, as the cycle would be the fuel of its existence and the reason for it existing. The Arisen was created as a mean to perpetuate the cycle and the counterpart of the Dragon, and the Pawns, born from nothingness too, were there to aid the Arisen. At the end of the game our pawn becomes a small Dragon as a fail safe for the cycle, as it had lost its role and now was supposed to aid the Pathfinder, but due to our greater will granting them a will of their own they still aid us. Once the Pathfinder dies, they cycle is truly broken and the world is free, even if the future is uncertain.*
Some extra stuff:
*This last part is the one I'm most unsure about. I have to rewatch the ending. There is the implication that an existential being known as the Greater Will may exist and was the one that stablished the role of the Arisen, but I don't quite remember. I may change it if I learn something new.
What's the deal with the Gigantus? Supposedly, it's role is to correct the cycle when the Dragon isn't playing its role right, which explains why it appears as the Dragon is doing its utmost to break the cycle. How it would correct the cycle, I don't fucking now. I'm pretty sure it wasn't very well thought out and they just wanted the set piece.
The Crazy old man in the coastal village is probably the only character that knows whats up and changes his dialogue through the game explaining things to come. He also is an Arisen, he has the scar on his chest.
Why does the Pathfinder send us back to the Dragon's fight if he wanted us to continue the cycle? The meta reason is that the developers wanted to grant the players a chance to unlock the True Ending their first time and also help them figure out what they are supposed to do. From a narrative standpoint, by persuing him, we are already trying to break the cycle, and in an attempt to show us the futility of such thing, he is trapping us in a loop until we give up. Sure, there is the risk of the Godsbane, but if we are persuing him them his plan is fucked anyway so he may as well try to trick us into giving up.
While the story isn't really anything amazing, and I think it probably has some plot holes, what makes it hard to understand is that is told quite badly and requires players to actually had played DD:DA to understand it, as well as certain translation issues (for example, they don't call Rothais the Seneschal, just king, due to a literal translation of his japanese title and because they neglected to use the same terms established in DD1
Also yes, it probably was rushed and cut in many places. And also I probably got certain things wrong, sorry there.