Dragon Age II's story on the whole is a great example of a good story whose presentation was lacking. Part of this is due to the game's already poor pacing and repetitive elements (recycled environments and waves out the wazoo for most encounters), but the other issue is how disjointed the three main arcs are (divided up between the acts for the most part); quite often it seems there was little continuity between the acts, as if they were dealing with three completely different stories. If things were more coherent and better paced, DA2's story (and probably the game as a whole) would have been much better received.
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As for the general issue of storytelling in games, there are two key issues which seem to be dominant; the real challenge is that they're also some of the main features of the medium, so you can't exactly "go around" them.
1. The player sets the pace.
Pacing is a very important element for any good story, but things aren't quite so easy with games because the player has a degree of control over events. The easiest way around this is to have a very linear game, but that's not always an option; particularly since RPGs, the genre which is probably the most dependent on (or at least best known for) storylines, has a pseudo-requirement to be at least somewhat non-linear. Anyhow, linearity allows the developper to have some more control over the pacing (if vaguely imperfect due to them being unable to ever control how a player will act); this can give games some semblance of pacing, and can be done in some strongly story-driven games. The Final Fantasy series is predominantly linear, but most of the games have solid pacing for a game (XII & XIII.... not so much). For games where player choice is a huge factor (any of Bioware's RPGs are a good example of this), pacing goes out the window regardless of how story-driven the game is.
2. The "Mary Sue" Problem.
Due to the fact the player can lose an encounter with a foe, this tends to result in the player-character being unable to fail in terms of the storyline. A "Mary Sue" being an idealized self-insert character in fan-fiction is usually a sign of bad writing, but it's VERY hard to avoid in games simply because player-characters are self-inserts by definition. Of course, there's also the closely related "Escapist Character" archetype, which isn't very different from a Mary Sue. As for how this works in games, most of the dramatic tension and conflict comes from the possibility that the player can lose an encounter; the problem from there is that they get as many chances as needed to do it over until they beat it, and in many cases that is required for the story to progress at all. The net result is that the player-character ends up with an unbroken track record of victories over the course of the game in terms of storyline.
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How exactly can one work out a viable solution for the medium when its base mechanics are detrimental and/or contrary to what has been established as the traits of good storytelling for centuries?
While things have gotten better, there's still a long way to go; the issue is that this is actually somewhat of new territory in the realm of entertainment. There was an Extra Credits [http://penny-arcade.com/patv/episode/the-role-of-the-player] episode some time back which noted that games have to take the role of the storyteller into consideration, not just the audience. This is because in games, the player is both the storyteller and the audience.
The two main issues above are off-shoots of this. The player sets the pace because they're the storyteller; and like many novice/amateur storytellers (as many fan-fiction writers are), the characters do tend to lend themselves to power-fantasies instead of being stellar narratives. Solving the issues games have with storytelling probably goes into this, but how exactly isn't certain yet.
