I'm fairly new to the series but I've noticed that my paladin with two handed swords is much less effective than my friend who's dual wielding long swords; is any way to fix this or am I missing something?

It's not so much that two-handed swords are underpowered. It's that dual-wielding is hilariously overpowered. The damage bonus and increased crit rate for the two-handed style is nice, but it often simply doesn't compare to the sheer damage output of two one-handers with two weapon style.

Some of the best items in the game are two-handed, though, and the Holy Avenger sword in BG2 is two-handed, so it's certainly not a complete waste by any means. As a paladin you WILL want to be using the Holy Avenger much of the time, so having two points in the Two-Handed Sword proficiency is a must, even if you don't invest in two-handed style.

No, you're not missing something. Dual wielding generally does more damage; that said, there are some awesome two-handers, and and arguably the best weapon in the game is a paladin-only two-handed sword. You're definitely not gimping yourself, so don't worry about it.

Edit: ninja'd by Bev. :p

Dual-wielding only adds an attack per round and nothing else (2 if a certain scimitar is in your off-hand), at the cost of weaker to hit. When you're 1st level, and you only have 1 base attack per round, that's huge.
However, warrior (fighter+ranger+paladin+barbarian) classes get extra attacks as you level up, so the difference between 1 or 2 weapons shouldn't be as big later one. Plus 2 handed weapons are typically quite a bit stronger than 1 handed ones.

Dual-wielding is of course still better for rogues or clerics, since they don't get extra attacks as they level up.

Oh alright, I'm just worrying about this too early then. Thanks for all the advice you guys, really enjoying these games, flaws aside.

2-handed weapons have higher range and you can also switch to ranged weapons more easily than if dual wielding. When you reach 3,000,000 XP you can start picking Whirlwinds and Greater Whirlwinds as HLAs at level ups and get 10 attacks per round. Very good 2-handed weapons can be found later in the game.

Two-handed swords and weapons are definitely useable, and actually very good with the HLA GWW. It's just that dual-wield is superior. A warrior can easily get 10 attacks with improved haste, which does not only have a longer duration than GWW, but is also stackable with other HLAs like CS and GDB. The real icing on the cake are all the weapon bonuses applied to your mainhander. :)

Although Carsomyr is a very good weapon, i would recommend maxing bastard swords, longswords, and dual-wield style, which is way better in ToB for a Paladin

I disagree with fritzdufranz about weapon choices. Do not invest points into longswords and bastard swords, your friend has longswords, there's no very powerful one available in the game, it will take an eternity until you find a good bastard sword and there are better weapons out there in ToB.
I recommend specializing in 2-handed weapon for the extra damage and better speed factor and also in quarterstaves, buy the quarterstaff+4 from Rinbald and you can hurt the monsters immune to slashing weapons too. Also worth specializing in is axes so you can have a ranged weapon which doesn't require ammo, buy the returning throwing axe Azuredge in the Copper Coronet, it counts as +4 weapon in regards of monster immunities and does good damage. There are also very powerful axes in ToB.