Back after a long absence
I'll go out on a limb and say the Unreal 2 engine will be better.
Funnily enough, I've just started playing both Unreal and Half-Life again. I've had some problems with both on my Athlon/Nvidia PC, but I won't go into that.
Unreal and any game based on that engine has always seemed more graphically pleasing to me. Comparing the two original games, I'd have to say Unreal looks a lot better, but Half-Life plays a lot better.
I don't actually mind if this trend continues. If Unreal 2 looks fantastic and plays well, and Half-Life looks good and plays brilliantly, then I'll be a happy man.
However, it would be excellent if the Half-Life 2 engine could follow the current trend, and implement some kicka$$ features. I'm not saying it has to have rolling terrain and vast outdoor levels (like some upcoming games will have), but it should concentrate a lot on the lighting, realtime deformations, realistic textures, high poly-counts and advanced skeletal animation, including better facial animation.
In terms of how Half-Life 2 plays, I don't want to see it detract too much from how the first game played. They pretty much captured the essence of a perfect gaming experience, and they need to be careful about what features they implement in the sequel. The same really goes for Unreal 2, about which we at least have some advance information.
In summary, both engines will have their strengths and weaknesses, and it's up to the developers to get the best gaming experience possible out of their own technology. But then, they don't need me to tell them that...