When Itchy died between the first and second movie, he went through a time warpThink about it. Dogs live about 10 to 20 human years on average, and both Charlie and Itchy are 25 in dog years. Itchy died from choking on a piece of chicken, and the first movie took place in 1939, while the second took place in 1996, the year of its release.
Carface's time in heaven between films is responsible for his Villain DecaySpending so long in Heaven between films softened him a bit. He wasn't a good guy, but wasn't a threat like before. Worked for Dabura in Dragon Ball Z and he was a demon king, makes more sense here to. Also, this would help explain his Heel-Face Turn in the Christmas Special.
Anabelle managed to convince Carface not to return to EarthHe's last seen preparing to steal his life clock at the end of the first film, Anabelle convinced him not to.
Belladonna freed Carface from Hell as part of a Deal with the DevilWhenever Belladonna shows up, Carface works for her. It's never explained how he got out of Hell after Red dragged him there. Belladonna probably freed him in exchange for his service, she just didn't call in the favor until she finally showed up herself. When he performed his Heel-Face Turn and redeemed himself, it got him out of the deal.
Charlie is a reincarnation of Rocky Sullivan from the movie Angels with Dirty FacesBoth Charlie and Rocky use use a similar catch phrase "what da u hear what da u say" Both characters in each movie get out of prison in the beginning of the films, and both are betrayed by their former crime partner who tries to kill Charlie/Rocky to keep all of the casino they built together.
The couple that adopted Anne-Marie are really...J.R. "Bob" and Connie Dobb. Because, come on, the resemblance is just too uncanny!
The whole movie was a hallucination of Anne-Marie's.She was a half-starved orphan living in a garbage dump full of dogs, and out of loneliness personified the animals herself.
The Heavenly Whippet really did know everything that would happen.All dogs go to heaven, right? Even complete bastards like Carface (and rather more loveable bastards like Charlie). Even if they have done nothing to earn it. And the Whippet claimed that she knows everything that's going to happen, but Charlie manages to "surprise" her nonetheless. He returns to earth and manages to earn his redemption in the process. At the end Carface also plans to escape, and Charlie is convinced that "he'll be back". The whole plot actually makes a lot more sense if you assume heaven is running a Batman Gambit with these "bad dogs", letting them think they tricked their way back to life when its actually all part of the plan for them to redeem themselves. All dogs do go to heaven, but only because the bad ones all try the same thing Charlie and Carface did, with similar results.
Charlie never went back to Earth.When a dog winds up their watch or clock, they are sent to purgatory, set out to look like the place they came from, where a series of challenges and tests are set up to determine whether dogs like Charlie or Carface deserve another chance in heaven, or if they should be sent to hell.
Red was the monstrous demon creature from the first film.They've gotta be the same character...they've even got the same chin!
King Gator is a descendent of Louis.Ever since Louis made it as a successful trumpet player, he managed to land a lovely lady gator wife (or several) and started a line of musically-inclined alligators in the New Orleans area over the next few decades. While King Gator hasn't exactly sought a musical career, he still displays a love for song and dance and is quick to befriend anyone else with an affinity for music.
Charlie is a lich.His watch was his phylactery (Soul Jar in Tropese).