I do love both games, the Shenmue 1 gets my vote for being the best of the two.
Smaller, more intimate environment. Smaller cast of NPC's and whatnot that you could get to know more over the course of the game. Absolutely revolutionary concept and execution for its time...I was in complete awe of this game when I bought it at launch. Everything just seemed to work perfectly in the grand scheme of things. Hell, I even called in sick to work to play the game, which is something I've never done before! :o