No, you can just install the expansion and the game will just continue as normal - apart from the fact that 'Watcher's Keep' will be added to your world map. There's no need to import or make a new character - just keep going as you were. Watcher's Keep, by the way, is very difficult. Don't start it until you've become fairly powerful. I.e. until you're at least halfway in SoA.
By the way, yes the Inquisitor is really nice, but you get one of those as NPC. As an Undead hunter, I just stand and hack at vampires (immune to level drain) while Keldorn gets rid of illusions or uncharms me if necessary. Which is nice <img src="/ubbthreads/images/graemlins/smile.gif" alt="" />
