I like this look at plot continuity and sequels over on the CRPG Addict:
Plot Continuity Across Sequels
Having played games where the sequel makes bizarre assumptions about the previous game, I was keen to see his examples.
I've played a few games that couldn't even keep straight what I did during that particular game - Fallout II was the worst example I can think of off hand. In that one I got an ending that talked about how I wiped out the deathclaws (I hadn't) and two end vignettes that contradicted each other. Nice. So sometimes it seems to be a bit too much to expect it to happen between sequels.
This is one reason I love tabletop games so much - it's not limited someone's scope and ability to cover all possibilities. You just go with what happened and make stuff happen from there. But a well-done sequel segue in a video game is very nice.