While they made 3 games I think it was suppose to be just the first two parts of their original vision. In the original trailer for the first game they showed some cut scenes that never made the game. Those did make it somewhere in the middle of the second game though.

Overall the biggest problem with the games was that they had no clue how to make a game. They kept changing graphic models, battle systems and pretty much everything instead of sticking with something and building on it for the next game. Xenosaga 1 had an insane amount of cut scenes up front for the story and then towards the end the trend became damn near the exact opposite. I liked the battle system for the first game as it was very free to let me create the characters how I wanted. It was probably too much for most though. There was also a lack of dungeon music if I am not mistaken (I didn't mind or notice).

The second game they went totally insane and jacked up every single aspect. I almost think they had meetings with the topic of "How can we make this worse?" Horrible music, worst graphics, worse voice acting, God AWFUL battle system and probably some other stuff.

The third game finally got it all right. It struck the balance of story to gameplay. It had a nice simple battle system and leveling system. They had a supplemental database to fill in the details in the background instead of wasting money with expositioning it all through cut scenes. Also for the first time in the series the Mechs were useful and fun. I think they were used in the second game but I am pretty sure it was annoying and bad like everything else. In the first game you never had to use them and I never did.

A great example of how to do this whole thing correctly is the .hack series. Multiple games using the same engine and just building off of each other to reduce costs/spread costs over the production of multiple games. They probably spent more time upfront planning to make sure everything they wanted was set in place first then went to work. Humorously enough, both series were published by Namco-Bandai games :/