A Nightmare on Elm Street 2: Freddy's Revenge -- yeah, love the first one (who doesn't?) but very rarely have I seen a horror flick as blatantly and humorously metaphorical as this. Intentional or not (director Jack Shoulder says it wasn't), anyone who watches this flick and doesn't see plainly that Freddy represents Jesse's repressed homosexuality just isn't paying attention.
Blade 2 -- a rip-roaring, blood-soaked, action packed horror/action/splatter flick, bursting with director Guillermo Del Toro's signature touches and visual flair. The final fight featuring Blade and Nomak beating the piss out of each other is a superhero fight fan's wet dream.
Evil Dead II: Dead by Dawn -- okay, so, it's not technically a sequel and is more like an expanded remake, but I doubt there are many horror fans out there who'd argue it's better than the original. Not that Evil Dead was a bad flick, not at all. In fact it's one of my top 10 all-time favorite horror flicks. But so is Evil Dead 2, and it's slightly higher on that list.
Hellbound: Hellraiser II -- I'm one of the few folks who likes this flick better than the original. Still a fan of the first Hellraiser but I think this one outdoes it in many aspects; better FX, a better overall story, better visuals, etc.
Phantasm II -- while it's far from a great flick (unevenly paced, illogical, etc) I still enjoy it better than the original and the other sequels, none of which I enjoyed at all.
Those are the only ones I can think of at the moment.