Do you live in North America? It received quite a small amount of exposure, so it's no surprise you have not heard of it before. Quite a honest shame, in my opinion, but Atari has never been my favorite publisher (they handled the North American release). Also seems quite likely that there will never be an official English release of the Gothic II expansion, Night of the Raven.
By the way I talk about it, you can most likely surmise that I hold a positive appraisal of the game. The original remains one of my favorite action-RPGs, the sequel is very good as well.
Perhaps the largest flaw of the game is the control scheme. It's cumbersome, and especially in combat. Though if you stick with it, you do become used to it (the main part is getting that far, many people give up before that point). I have not played the demo, but I would assume it has the same control setup as the full game, and it sounds like you have no problems there.
The game-world is not a large as Morrowind, but in my opinion it is far more lush. Forests, farms, animals (both passive and aggressive), hunter's shacks, and everything else; it feels more real in a way. Morrowind was a bit sterile.
There is an element of non-linearity to it, but in the full game, you find if you venture into certain areas the enemies will tear you apart quickly (it does force a certain progression of the game). You can find all number of small quests, but the main quests are linear (though there are different approaches at times, though it does come down to combat often).
Also, the character system isn't completely open. You find that at a point in the game, you have to chose between classes.
In the end, it gets my heartily recommendation. If you enjoyed the demo, I think you will enjoy the full game. Like I said, the major sticking point are the controls (though the interface can also be a hassle).
