You have to corner it at the alley in town where it can only move up (not left, right, or down). That's right of the southeastern most house in that section of town. And yes, it's really rather difficult (or at least annoying...).
Depends on the aspect you're observing. The first Suikoden had better music (although there were a few really nice songs in the sequel), more interesting main character interaction, and the ending was relatively thought provoking (not the stupid character post war stuff, I'm talking about the really short blurb at the end). Suikoden 2 had better graphics (although surprisingly not that much better in some emulators like ePSXe), a by far more interesting "secondary" character than the hero, and I liked the numerous secrets in the game. Overall though, I agree that they're both about equally awesome. I can't wait for Suikoden 3.
Suikogaiden != Suikoden 3. Suikoden 3 is the first PlayStation 2 entry in the series (and yes, probably the game that will make me buy the accursed system. Sigh...). Suikogaiden is another game that you just described. If I knew any Japanese, I'd check it out, because it looks fairly intriguing.