>>12730674I actually didn't know that...
But from what I got out of the First Gen games, this was pretty much supposed to be a one and done series. They probably weren't planning to do a second gen if not for the IMMENSE amount of popularity accumulated. Notice how Gary says that he's the Strongest Trainer IN THE WORLD instead of in Kanto.
The Second Gen games thought that it would finish there. That's why you have it set two years later, and actually tell us what happened with Red. It's also the same reason that Kanto and Johto share the same Pokemon league. And why ALL the Gym Leaders use types different from Kanto's.
Plus, an Ethan vs. Red battle makes for an excellent finish to the series, no?
Once they did the third generation, they caught on that this would be an ongoing series...and acted accordingly.