Favreau has a natural storytelling ability and it comes through in this sequel. Tony Stark shows character growth as he now struggles with his massive ego as a superhero and Rhodey, Pepper Potts, and Nick Fury do their part to put him back in line.
Very satisfying action sequences. Whiplash is scary, Rhodey acts like a military trained Lt. Col. and comrade of Stark. Don Cheadle fits Rhodey like a glove. He has rapport right away.
Constructive criticism: Black Widow's fight sequence is practically irrelevant, though I guess this is a good intro if she ends up in the Avengers movie. - The final battle sequence would be 10X better if it was during the day. Man it was sometimes hard to see what was going on in the dark. But alas, so many action movies end with a battle at night (see: FF, Hulk, Spiderman 1,2,3, Terminator 1,2...)