With the PC version of the game you can install FoV, load your existing save and continue from that point (there is a seamless transition into the add-on content).
Right now D2:ED saves are not compatible with DKS, due to various changes made. Lar did mention the possibility of creating a tool to import a D2:ED save and export it into the FoV section of DKS, but if such a program is release I don't know if it will also be available on the Xbox. In theory such a tool could make it into the US Xbox release (as long as that change wouldn't force them to restart any testing, etc), or be released as DLC.
FoV is primarily in human form, but there is a large dragon battle. There was initially going to be an open Broken Valley type area, as well, but it got cut (see Lar's post in
this topic about the design of FoV).
