First of all, there are sexually transmitted diseases in Fable 2 that result from having unprotected sex. Your character's chances of receiving an STD are relative to the history and background of his or her sexual partner. Female heroes can become pregnant and will eventually have a baby. It's not possible for a character to have a miscarriage -- Lionhead discovered that this was too emotionally charged -- and being pregnant does not alter your hero's effectiveness in combat.
Should your hero have children, they will grow up to resemble their parents. If your character is evil, your child will become more evil and will act up at school. If you're good, then the child will grow up to be a goody goody just like you.
The world in Fable 2 will directly respond to your heroic deeds. For example, should you save a gypsy camp from destruction, the camp will remember you. When you return, people will remember your efforts and comment on them. Your children will also learn of your exploits and will burst through the door to greet you when you return home, shouting exultations of your recent victories.
There are two new spectra that govern your character's appearance in Fable 2. In addition to the strength, dexterity, magic, and Good/Evil morphs, there are now the cruelty/kindness and wealth/poverty morphs. Molyneux didn't go into too much detail as to how these affected your character's appearance, but did note that the morphs were not cut and dry. For example, the cruelty/kindness morph is not as simple as good and evil, because sometimes the evil deed is in fact a kinder action (you have to be cruel to be kind, etc).
The last bit, and this is probably the most interesting, you can own any piece of property in Fable 2. We've covered this before, but we didn't realize the extent of it until last week. When we say any piece of property we mean any piece of property. This includes houses, shops, merchant carts, castles, dungeons, temples, everything. You want to buy up every shop and cart in the market district? Fine. Be careful though, as the economy is dynamic, and should you decide to sell your goods for too high a price, the area may become poverty stricken and dilapidated. Additionally, each piece of property adds its own sub-quests to the game. Maybe you want to buy a castle and become king. It's possible. You'll have to complete a long series of quests to do it -- and it has nothing to do with the main storyline -- but you can do it.
Granted, we didn't see anything besides the dog, so right now we've only got Molyneux's word to go on. He says he's learned his lesson from Fable 1 and isn't promising things he can't deliver, but we'll have to wait and see. Still, If even half of these things come to pass, Fable 2 is shaping up to be quite a contender.