FFVIII seems to lend itself more to a sequel than any other FF game.
With FFVIII, the characters were heartily underdeveloped (pun intended) and there are just a crapload of loose ends. Esthar - now that Ulty and Adel are gone, what's gonna happen? Galbadia, who is in control? What about Selphie's friends at Trabia - can that school be repaired? Can it fly? What about Zell's 'mother'? Are they famous? What is the role of Garden for the next thousand years? There are dozens of interesting places to take the characters that don't involve Ultimecia or Sorceresses at all.
The problem is how do you make the sequel BETTER than the original? I mean, these games were made to be long, epic, world-changing stories. You can't have massive shit happening all the time or you'd get the Compilation of FFVII, what with Meteor, Geostigma and Omega happening in the span of three years.
With sequels to epics as grand as pre-online Final Fantasy games, you start off losing. The only thing you can do is determine how big of an ass you make of yourself. If you're in it to win, you either have to rehash a crapload of plot devices from the last game (Advent Children excels at this) or make a bunch of new threats that come out of left field and are hated by half the fans (again, Advent Children). I mean, after goddamn Time Compression, some leather-clad jerk-off with an evil scheme will just be laughable, and if the heroes take it seriously they will just lose our respect (I think I've made my point about Advent Children).
On the other hand, if you go in ignoring fanservice and without trying to one-up the original game, it's an automatic disappointment because you aren't even trying to do anything that will impress anyone.
So I agree, I don't think any FF game lends itself to a sequel. Spin-offs? Sure. Fanfiction? Sure. A straight sequel that follows Squall or Rinoa is pointless, because Squall and Rinoa's story is done. Both characters have gone through life-changing arcs in which they've battled every obstacle on their road to happiness. They're done. Cid's still alive, so Squall won't be taking over as leader anytime soon. Unlike Yuna, Rinoa means shit all to the world. Rinoa and Squall are just a couple of decorated war heroes sent by SeeD to accomplish a mission. All that Rinoa/Sorceress stuff was developed to its full potential and there is nothing left to say. (unless she's ultimecia). They have no new ground to explore.