Okay, since I'm still a newbie and can't pm, I'm just going to post my ideas here.
Idea for Prequel:
Think back to the messages that popped up in Hell (Did you know that Jenka...)
"Under the extreme cruelty of the torture, Ballos's magical abilities finally ran wild.
The king was engulfed in the swirl of magic and destroyed in an instant.
In a single night, the kingdom that Ballos so loved was reduced to ashen ruins."
It never says what kingdom this was, and I think that the kingdom was Atlantis, it never "sank beneath the waves", it was destroyed by Ballos. The prequel could have Ballos as the p.c., and would include his life in Atlantis, his torture by the king, and his destruction of the continent; then his exile on the island by Jenka and creation the crown, the prequel ending when Quote and Curly arrive and destroy him.
Idea for Sequel:
(Takes place after best ending)
Quote, Curly & Balrog are living a quiet life after the events in Cave Story, but suddenly weird things start happening, like Curly disappearing, and the Doctor arriving at their house with what appears to be amnesia-he doesn't remember anything past when he arrived on the island, and thinks he is still one of the good guys. The three of them travel back to the island to try and find out what's happening.
This sequel would make use of my other idea that the core and the chamber that it was in were not made by Jenka, my theory is that some mad scientist made the core so that the island would float, and along with it he made a time travel/doomsday device which is what caused Curly to disappear, the Doctor to reappear, and other events to happen throughout the sequel.
It is a very confusing idea, so don't hesitate to ask questions...
Thajaro