While T2 is definitely a direct sequel of T1, you have to realize, these are both games that focus on "kill everything that moves" and "loot everything you see". The storyline is only there to help players become familiar with areas and the enemies that arise from them, but isn't necessary play T1 over T2.
Honestly though, T2 is a completely reworked version of T1 that features a whole slew of new improvements, as well as dedicated modding support, etc.
Consider this, it's very much like the L4D series. While L4D had a storyline, and so did L4D2, the story lines were only vaguely connected, but the game was more about a zombie co-op game. This isn't to say the storyline was non-existent, but it's there to guide players to understand what's happening around them. Gameplay-wise, much like TL2, L4D2 is a very very nice upgrade to L4D, in that there are more weapons, more game modes, more special infected, and other nice sweets.
Basically, consider T2 over T1 as a nice upgrade, with more features than its predecessor. If you really really care about storyline, by all means, it doesn't hurt to play T1. If you really like gameplay, then I'd say it really doesn't matter.
There is a way to respec, up to a point.
You have the option to respec your 3 most recently spent skill points. This means that you can invest a little into a combo of skills that you want to try, and if you do not like it you can claim up to three points back.
To get a respec visit the NPC in Estherian Enclave, the first town you will find, who will perform skill respecs for you at a small gold price.
You cannot respec your Strength, Dexterity, Focus, and Vitality attributes.
However, as pointed out in @ShameFulmer's answer, if you don't like the built-in system, you can modify your save file instead. The easiest way is to replace your shared stash save file with one that is full of respec potions. There is such a file available on the forums as Shared Stash Respec Potions.
This does not mark you as a cheater.
To summarize the instructions on the forum, being careful to not delete everything currently in your shared stash (it wouldn't hurt to move everything valuable out of there):
Ensure that the game is closed and that Steam Cloud saves are disabled.
Backup your shared stash save located in C:\Users\< username >\Documents\My Games\Runic Games\Torchlight 2\save\RandomNumber (replace < username > with your username). It should be called sharedstash.bin. You can either move it somewhere else or change its name.
Download the file from the forums and save it to the same location. This will replace your shared stash with respec potions.
Open up the game, load the character you want to respec in a single-player game and take as many potions from your shared stash into your character inventory as you want.
Close the game and restore the downloaded sharedstash.bin with the file that you backed up.
Re-enable Steam Cloud saves, and enjoy the game! You will still have your old shared stash and your character should be carrying all of the potions that you took out. You are free to put them back into your shared stash and use them with other characters as well. Using these potions will not mark your character as a cheater, like some other methods do.
Best Answer
There are no passive, out-of-combat health regeneration (w/o skills) like in WoW.
Instead there are many other ways to generate/recover health.
You can gain health from:
Armor and weapons with Life Steal (X Health Stolen per Hit) or Health Regen (+X Health Per Second) item mod. There is also the rare item modifier - Fully Heal Self.
Use an Active skills such as the Engineer's Healing Bot, the Embermage's Death's Bounty, the Outlander's Stone Pact, Berserker's Shadow Burst. There are also passive skills that can heal your character, like the Engineer's Charge Reconstitution and the Berserker's Blood Hunger.
Equip and use spell scrolls, such as Heal Self, Heal All, or Draining Touch. Pets can learn spells, too! The have 4 slots just like you character (I personally prefer to give it summon spells). It frees up some of hot bar slots and mana. (Thanks Dycker)
Pet items can also have the modifier "X Health steal to master on Hit"