The Electron Cyclotron Drift Instability (ECDI) driven by the electron E × B drift in partially magnetized plasmas is investigated with highly resolved particle-in-cell simulations. The emphasis is on two-dimensional effects involving the parallel dynamics along the magnetic field in a finite length plasma with dielectric walls. It is found that the instability develops as a sequence of growing cyclotron harmonics demonstrating wave breaking and complex nonlinear interactions, being particularly pronounced in ion density fluctuations at short wavelengths. At the same time, nonlinear evolution of fluctuations of the ion and electron density, as well as the anomalous electron current, shows cascade toward long wavelengths. Tendency to generate long wavelength components is most clearly observed in the spectra of the electron density and the anomalous current fluctuations. An intense but slowly growing mode with a distinct eigen-mode structure along the magnetic field develops at a later nonlinear stage enhancing the tendency toward long wavelength condensation. The latter mode having a finite wavelength along the magnetic field is identified as the Modified Two-Stream Instability (MTSI). It is shown that the MTSI mode results in strong parallel heating of electrons.