Significantly better
Not as much dialog in this one, which probably helped. The scene with Daryl and Setzer was a bit bad dialog-wise. Some of it is just corny. You really need to spend more time on the lines to make them sound in character and more original (less corny/cliche). These characters are cool people, make 'em sound like it. :P Also, the character mostly talk the same. If you didn't indicate who was talking, you wouldn't be able to tell who it was by the style of speach. Basically, the characters' speach shows no unique character (save Gau with, "Shiny! Shiny! Shiny!")
The animation needs to be a little smoother, too. Like the credits at the end are really choppy.
This installment is significantly better, though. More good than bad stuff to say about it. The fight scene with Sabin and Duncan was pretty nifty. Only thing that ever looked bad was rotating the sprites. But, that always looks bad. Like part 4, the scene with Clyde is good and clearly stands out against the other parts. Also, Setzer entering the shop looked pretty cool, save his arm pushing open the door. It just needs to be a little bit smoother.
Very good, deserves 4/5. I'm looking forward to the next installment.