Continuity mistake: When they are looking at prospective husbands, Princess Mia and Lilly are eating popcorn and Lilly asks if it tastes like pears. Princess Mia answers its a "Genovian specialty," and the popcorn disappears immediately afterwards. (00:25:45)
Continuity mistake: When Princess Mia and Andrew are at the seashore, we see Andrew with two cameras; one around his neck and the second across one shoulder. When they are running after Princess Mia's scarf, we still see the cameras. But when they are flat down on the sand and Andrew wraps the now recovered scarf back around Princess Mia's neck, Andrew has no cameras. (00:27:05)
Continuity mistake: In the scene where Andrew Jackoby gives Princess Mia the engagement ring, she opens the film canister and the shot shows her emptying the ring into her left hand which reveals a freckle on her pinky finger. When the shot returns to her hand the freckle is gone. (00:29:30)
Continuity mistake: When Princess Mia and Nicholas duck into a closet to finish discussing the "lie-dance," we see Nicholas reach across to turn off the closet light. As he touches the light switch, we see he has a wristwatch on. But the very next shot is a close-up of him actually twisting the switch, and either he has no watch on or it is now under the sleeve. (00:33:50)
Continuity mistake: In the fan lesson, when Queen Clarisse puts the fan over her face, it shows the back. When it cuts back to her, it is showing the front. This happens twice. (00:37:15)
Continuity mistake: When the Queen is listening to the problems of the Genovians, we see a shot of the other Genovians waiting in line for their turn to speak with the Queen. The next person who speaks to the Queen is Jacqueline, but we didn't see her in line, and after that is Tiny Duval, but we didn't see him in line either. (00:38:35)
Continuity mistake: When Nicholas serves the Queen a chocolate cake, the position of the items on the table changes position between shots. For example, in the close-up of the cake, there's a tablecloth with flowers next to it. In the other shots of the table, they're much further away from the cake. (00:43:05)
Continuity mistake: When the Queen is being served chocolate cake by Nicholas, the blob of cream is smaller in the close-up than in the following wide shot. In the last shot of the scene, it's even bigger, without anyone touching the cake. (00:43:30)
Continuity mistake: When Princess Mia and Nicholas kiss by the fountain, their arms change position between shots. (00:47:55)
Continuity mistake: After Princess Mia and Nicholas kiss by the fountain, as Mia says, "Stop trying to confuse me", she is about to walk past the statue. In the next shot, she's already passed it. (00:48:10)
Continuity mistake: When Princess Mia stops the parade and goes over to talk to Carolina, we see Carolina's hair from a back, side view and it is pretty messy. Then we see a front shot and her hair is very neatly tucked behind her ear with her braid hanging neatly by itself. Then we see a quick back shot as Princess Mia asks the boys' names that are messing with Carolina and we can't see her ear but the hair over it is very messy. Back to a front shot and it is neat again until Carolina tells Princess Mia that the boys were tugging on her braid and she demonstrates by pulling on her braid. (00:55:40)
Continuity mistake: When we see Asana mattress surfing, the mattress she comes down the slope has no label on the front. But when she reaches the bottom, there is a label (or two) on the top front center. (01:01:00)
Continuity mistake: In the DVD viewing when Nicholas is helping Mia with her archery, you can see the sun shining on them. However, between shots they appear to be in the shade because the sunshine is not there. (01:09:25 - 01:10:15)
Continuity mistake: When Queen Clarisse wakes up Lily in Princess Mia's bed, the arrangement of the pillows changes between the first shot of the scene and the shot where Lily turns around. (01:16:05)
Continuity mistake: After Andrew kisses Mia, in the shots facing Mia, her hair is blowing in the wind. In the shots from behind her, there's no wind. (01:18:15)
Continuity mistake: When Mia takes the chicken out of the basket and it gets loose, we see the chicken run away, followed by Mia running after the chicken, and finally the palace guard falling amid a number of boxed, gift-wrapped presents. The only boxed presents that were visible in any of the previous shots were already on the floor, and there were none anywhere close to the palace guard that he could have knocked down as he fell.
Continuity mistake: When Princess Mia is announced at her birthday ball, she waves with her right hand and then waves so enthusiastically with her left hand that her bracelet flies off backward. We see it flying fairly high up judging by the door in the background. But when the doorman catches it, its much lower then it should have been (from the previous scene) with a much lower and flatter trajectory.
Continuity mistake: In the scene where Nicholas is giving the Queen a chocolate cake in the kitchen, flowers suddenly appear on the table and behind the queen.
Continuity mistake: The scandal video that Elsie shows is not consistent with what the man in the boat with a video camera could have really shot because of the length of time he ducks down into the boat and then is seen sitting up and then bringing out his video camera and supposedly "starts" shooting. If he was shooting before he ducked down and then reappeared, there would be a big gap of Princess Mia waking and sitting up and looking at Nicholas and then at the cameraman and then back at Nicholas. If he didn't start shooting until we actually see him raise the camera up, then the video replay in Princess Mia's room couldn't have had everything on it that is shown.
Continuity mistake: In the scene where Princess Mia is inspecting the troops, there is a shot of Lord Devereaux watching the procession. The color of his tie is black. Immediately afterwards, when he goes to comfort Princess Mia in the barn, his tie is red. The mistake was acknowledged by director Gary Marshall during the commentary on the DVD.
Answer: My guess is because Mia and Michael didn't actually start dating until the third Princess Diaries book. The second and third books were all about Mia trying to get Michael to go out with her, and since they went out at the end of the first movie, they couldn't base the second movie on the second book.