Well, the reason (likely) is that 3 Extremes II wasn't really the sequel, it actually preceded Three Extremes. Originally it was entitled Three and utilized some lesser-known directors and was only ever released overseas.
So then they decided to make another one, and called it Three... Extremes, with better-known directors. This is the movie with Dumplings, Cut, and Box. Since Three Extremes made it to (and was well received in)the Western world, they decided to repackage the first movie (Three) for the West, but retitled it as Three Extremes II since it was being released here second.
So the "worse" sequel is really just the first attempt, and Three Extremes was their second and more polished attempt.
http://en.wikipedia.org/wiki/Three_(2002_film)
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