Well, this is a complicated question, actually, since there is no one "overal story" to the Highlander series. The first movie was really supposed to be self-contained. For MacLeod to win The Prize, he had to win The Game and be the last Immortal alive. But, with Highlander 2: The Quickening, that was no longer the case. Even though MacLeod won The Prize, there were still Immortals left to kill. In the theatrical release, Highlander 2 showed that the Immortals were from another planet. But, "The Renegade Version" was recut by the director to remove any references to another planet from the movie. The release of Highlander 3 showed that not only did MacLeod not kill the last Immortal, it also basically undid events in the second movie. Highlander 2 took place in the future, but events that supposedly happened in "the past" of Highlander 2 did not occur in Highlander 3. Highlander: The TV Series featured another MacLeod entirely (Duncan, not Connor). There were references to events in the first HIghlander movie (Connor killing The Kurgan), but according to the Highlander TV series, the events of the first Highlander movie STARTED The Game, it didn't end the Game. According to the TV series, The Prize had not yet been won. Highlander 4: Endgame, had parts of the storylines from both the orignal Highlander movie and the TV series, but is not technically part of either. So, to make a long story short: most fans ignore Highlander 2, and the multiple Highlander storylines also ignore it.

This DSS or "dissapointing sequel syndrome" happened with Star Trek V and all the Batman movies after Batman Returns (except the awesome "Begins") because they focus on continuity and SFX instead of story. Highlander wasn't made to be a sequel and they should have wrote it differently around the lone mortal Connor. e.g.- Have an Immortal from the past, like Katana, before MacLeod's time, tamper with time travel by not having his head chopped off when he should have because of an energy surge from that SHEILD thing around Earth. It hits Katana in the distant past (say 1300 AD when he's fighting Kurgan or someone we recognize [but not Ramirez] and it "somehow" sends him to MacLeod in the future. This way, it could happen that he's not the last and MacLeod would recognize Katana as someone who should not exist but must be destroyed to restore the balance of everything in the universe and creating chaos on an already messed up Earth. (Minus those two freaky twins on hoverboards, of course!) Or you could have them sent by Katana in an alternate past on some unknown island and secure the future by sending the twins but I think the Renegade version is like that already. Yoda the Hutt