Dragon knights are humans that have been given the ability to transform into a dragon, who at one time ruled much of Rivellon. A dragon is blamed for killing the Divine One in the last war with Damian and the Black Ring, and an organization of dragon slayers formed to hunt them all down in retaliation.

The hero starts off as a slayer, eventually comes face to face with the last dragon knight (fatally wounded in a battle with some other slayers) and is given her powers. This doesn't go over very well with the other slayers (though most don't recognize the change).

The main badguy in D2:ED is the baby from the end of Divine Divinity, and the main badguy in Beyond Divinity.

can someone sum up the story

You do not loose, per se, at the end of the game. There is a slight setback in your effort to save the world, however...
The upcoming add-on picks up seamlessly from the end of the main game.


Rivellon isn't big on proportionate responses.
After Damian's girlfriend was executed by the Divine for being a Black Ring witch (and helping her necromancer father experiment on children), he sword revenge on his father and sought to spill an ocean of mankind's blood for each drop of his girlfriend's blood.
One dragon (or a small group) was tricked or manipulated into attacking the Divine, and that was enough for Rivellon to forget about the Black Ring, and start an organization of elite warriors set on genocide.