I know this game has been out for a while but I still have yet to play it. I really enjoyed the first installment but the second one felt like a punch in the gut. I probably should play it for completion purposes regardless but any feedback or opinions would be appreciated.

Short answer: yes.  It's far and away the best made game in the trilogy.  It's sad that I can't recommend the series as a whole very easily because the second episode is just so terrible, but they managed to fix pretty much every single thing wrong with it and make a very solid RPG with the last part.  It does a fairly decent job of wrapping up the plot (considering what they had to work with by the time they got to that point...).  Also, the in-game music is a whole heck of a lot better than Episode II's, though the "best of" selection used for the soundtrack was mostly terrible choices considering how good a lot of the other stuff in the game is.

I'm going to check out Pt 1.  Never played it, but hoping for a good ride.  Battle system, music? 

I intend to play pt 3 as well, but have heard nothing but gripes about pt 2, should THAT be skipped?

It's definitely worth playing. I consider it the best of the trilogy (and by far better than the crappy second).

1 is playable, but pretty generic.  2 unfortunately is required if you want to understand the story.  If you choose to play it, make sure to do this: there's an area early-ish in the game where you only have Shion and can level the hell out of her cheaply, which in turn makes the rest of your party the same level when they join her again.  Doing this will alleviate a lot of the pain in the incredibly stupid battle system.  Otherwise expect every battle for the remaining 3/4 of the game to take about 10 minutes each while you set up combos because it's the only way to hurt enemies.  Ugh.

I thought 3 has an extensive text "database" with all the previous story one would need to know to play the game?

My friend told me to do this and I didn't believe how important doing this was. I had an extremely hard time making it through the last place as a result of not sitting there and bulking up with Shion earlier.

I've only played up to ep.II but dispite the gameplay one should play it for the storyline at the very least. If you're quick you can finish it in about 20hrs anyway.

While the information is there, it's presented more as a detailed collection of facts, suitable for use as reminders, than as a linear summary of events. I don't think it's a worthy substitute, even considering how much I hated episode 2.

The third game is excellent, though. If you can find the time to work through the abnormally long-feeling twenty-five hours of the second installment, you should definitely invest time in the third one.

That much is true... despite its gameplay suckiness, at least it's a shorter game than I or III.

I didn't start this thread, but I am encouraged by the responses all the same.  I loved Ep1 but didn't enjoy Ep2 at all.  I'm still hoping to get Ep3 done sometime this year, and these responses may help me get off my ass and do it.

I got maybe halfway through 2 before giving up on it and simply relying on the (mostly sufficient) databases of 3.

I just wanted to update this thread since I found a copy of Xenosaga III today. When I found it I kind of squealed like a little girl and freaked out everyone else in the store, but for $18 I'm game.

I don't know when I'll get around to playing it however. It only took less than three years to find it (but then I wasn't really hunting for it either).