The sequel should start with a dream sequence that takes place in the world of Super Mario 2 (Mario USA) with Birdo and Shy Guys and Mouser.
Then Mario wakes up on the beach relaxing, on vacation. Where? Dinosaur Land! Super Mario World is the logical basis for the sequel. You have to introduce Yoshi! You don't really want a save the princess story, but Yoshi has siblings captured by the koopa kids.
Bowser can remain stuck in the cage (his escape is the B story) until the end when he gets out and flys to dino land to stop Mario allowing for a version of the castle top battle.
