Like many of Disney's direct-to-video sequels, this was intended as the pilot for a TV series. This is evident by the episodic structure of the plot, which would be cut into three separate episodes for the show's regular run. However, due to the disappointing box office of Atlantis: The Lost Empire (2001), production of the series was halted and the ending was rewritten to provide closure.
Tom Wilson played Carnaby in this film. Wilson is best remembered as Biff Tannen in the Back to the Future (1985) movie trilogy that starred Michael J. Fox. Fox was the voice of Milo Thatch in the first movie Atlantis: The Lost Empire (2001).
The 1st mystery with the Kraken is based on the idea of the call of cthulhu. With the town that's dark and strange, people who act as if they're not human and a dark secret that might bring the end of humanity.
Presumably due to the commitment he had with films which were able to release in theatres at the time, Milo's voice actor from the first film, Michael J. Fox did not return to voice him in the sequel, and was replaced with James Arnold Taylor, who had previously filled in for Fox in the first film's video game adaption.