C&S Version 2 was basically a reprinting of Version 1. The original typeset and weakly bound books were not holding up and FGU saw a chance to revamp the game without much more effort than repackaging it as three seperate books - one the game system - two the combat system - and three the magic system. they packaged all three in a pretty box with a weak drawing of a knight and his damsel (or sorceress). The box held up as good as the version 1 books.
C&S Version 3 was the first real rewrite of the game mechanics. Version 3 was a really good system but lacked publishing power - I think Highlander Designs put it out. It added the first real skill system - Skillscape, I think. They had some good support books especially the Beastiary.
C&S Version 4 was a second rewrite of the ruleset. Played Version 4 for many years with good success. The combat system was cumbersome but realistic. The Magic System was more workable than version 1/2 (although I like version 1/2 better. Just something about the work you had to put into being a Wizard in that system made it fun.)
Overall, Version 4 was the most refined system of the four. Three had the best support material. But verison 1/2 will always hold a place in my heart. It was raw and the ruleset was limitted, but that fed the imagination. The rule limitations let the GM make the decisions and that seems right.
Early C&S was made for the Medieval setting with a Tolkien flair. Playing it, you got the feel of being in middle ages England/France, something you can get, but typically do not with D&D. Version 3 continued that feel but eliminated the Tolkien-esque feel and went more the medieval feel.
Sadly, a lack of support matierial and a lack of time on my part to come up with adequate source for gaming sessions made me move my group to Pathfinder. The support material for PF is unbelievable. My group would love to move back to the C&S ruleset though.