If there was a sequel, I think it'd have to give more attention to the secondary characters. Quistis in particular was horribly neglected in the original.

It would be nice to see a return of Seifer's posse, whether as playable characters, NPCs, opponents or whatever.

Rinoa can't be the only sorceress in her world, so the plot could feature some other, who's been in hiding. But I doubt that sorceresses would return as the antagonists. That'd seem tired and unoriginal. Maybe the GFs could have a greater role as characters, rather than merely being gameplay elements? Perhaps they've grown tired of being hunted and enslaved by humans?

Some new characters would be nice.. perhaps a few who are older than the regular cast, and from different backgrounds too - just to add a bit of diversity.

Laguna would have to return as a prominent character, I think.

It would be great if they could overcome the difficulty of 'GF amnesia' so that the characters could recover their full memories... they'd all seem much deeper if they could discuss and reminisce about the past.

There are plenty of things that'd be nice in an FFVIII sequel... let's keep hoping!