I side with most of the posters here. When i comes to outright coolness, the Mk1 is unrivalled, but the Mk2 is a rising star. When i comes to living with it as a daily driver, Mk2 all the way. The Mk1 has a nicer looking interior imho, the Mk2's one is very dreary and black and massive. When it comes to the outside, it's a matter of taste, but i find a good Mk2 (like the one a few posts up) looks at least as good as a good Mk1. The Mk2 is a lot roomier inside, especially noticeable in the width of the interior, and rear legroom, both improved significantly.
It's been a while since i drove either of them, but if my memory serves me well, the Mk2's handling is a tad less sharp than the Mk1's mostly due to weight and slightly softer suspension, nothing really shocking when you're taking it to the limit, but a lot nicer every day. Also, the engines in the Mk2 are nicer to live with every day, mostly due to more low-end torque, although the 16v needs more revs than the 8v one. The Mk2 8v feels slower than the Mk1 in the higher revs, the 16v feels faster over the whole range.