In this work a solver for two-dimensional, instationary two-phase flows on the basis of the extended discontinuous Galerkin (extended DG/XDG) method is presented. The XDG method adapts the approximation space conformal to the position of the interface. This allows a subcell accurate representation of the incompressible Navier-Stokes equations in their sharp interface formulation. The interface is described as the zero set of a signed-distance level-set function and discretized by a standard DG method. For the interface, resp. level-set, evolution an extension velocity field is used and a two-staged algorithm is presented for its construction on a narrow-band. On the cut-cells a monolithic elliptic extension velocity method is adapted and a fast-marching procedure on the neighboring cells. The spatial discretization is based on a symmetric interior penalty method and for the temporal discretization a moving interface approach is adapted. A cell agglomeration technique is utilized for handling small cut-cells and topology changes during the interface motion. The method is validated against a wide range of typical two-phase surface tension driven flow phenomena in a 2D setting including capillary waves, an oscillating droplet and the rising bubble benchmark.