Xenosaga I & II is a combined remake and retelling of Xenosaga Episode 1 and 2 redesigned for the Nintendo DS. The story changes were handled by the creator of the series.
The game changes large parts of the storyline in Episode 1 while following the elements established in the original game. This includes adding new characters and changing how some scenarios play out.
Changes in Episode 2 were much larger as the main character perspective of the game was switched from Jr. to Shion to match up with Episode 1 and 3. Some characters are removed from the story or have their fates changed or revealed. Some dungeons are removed, edited, or replaced.
It also answers some questions that the original did not as you follow a different path through the same overall story. It also changes the combat mechanics of Episode 2 to match Episode 1.