Factual error: At the end when Ben Willis and his son have Julie at the graves, Ray shows up with a gun. He fires at Ben but there is no bullet in the chamber. Later after the fight between Ray and Ben's son Julie picks up the six-shot gun and fires 8 shots at Ben.
Audio problem: When Julie wakes up and turns the lamp on, and it goes off, Julie says "Shit" but her mouth says "ouch." (00:08:25)
Factual error: Ray escapes from the hospital. The machine he was hooked to wouldn't go off like that causing panic. It would simply show "leads off".
Audio problem: In this movie, when Ben gets ready to kill someone, he withdraws his hook, and we hear the sound of metal against metal. But he never scrapes or brushes metal, so this is an incorrect sound. (00:59:15)
Continuity mistake: Julie leaves the classroom and walks along, talking to Will, and she has two bags on one shoulder. In nearly every shot the bagstraps change position. (00:04:00)
Other mistake: When Karla and Ty are in the jacuzzi, the "Bob Marley" guy shows up and says they can't be there because it's after midnight. At the same time, the fisherman is killing the hotel's maid who is knocking on doors to clean the rooms. Why in the world does the cleaning lady do the housekeeping after midnight?
Audio problem: After scaring Julie with his "suprise", Will decides to go and take a walk. When he says "I'm just gonna grab a few things," his mouth doesn't move. (00:38:10)
Continuity mistake: Julie goes to the mirror and wipes away some of the condensation from it, still leaving some condensation on it. However when Julie walks away from the mirror, the whole mirror is suddenly clean. (00:47:00)
Other mistake: Titus emerges from the pool, scaring Karla and Ty, and he has weed which he immediately smokes despite it previously being underwater and unlit. (00:44:25)
Audio problem: When Julie and Karla get their phone call from Mike In The Morning, Mike asks, "Well Karla what are you doing for this 4th of July weekend?" She says, "I'm actually school and studying really hard." When she says the last couple of words her lips don't move. (00:16:00)
Plot hole: On the bus, Ray has a prescription medication. Where did he get it since he broke out of the hospital?
Continuity mistake: The spots of blood on Titus's chin differ and disappear after he gets stabbed in the hand. (00:52:05)
Other mistake: Technically, this movie should be called, "I Still Know What You Did The Summer Before Last Summer" since the events take place the summer after the end of the first movie. That would be two summers after the events of the beginning of the first movie. (00:01:05)
Continuity mistake: When Ben falls in the grave his eyes are closed, then the camera cuts and the first or second time it cuts and you can see his eyes sort of open.
Continuity mistake: When Julie is in the confessional, a tear slowly trickles down the center of her left cheek. We then cut to a side shot and the tear has moved next to her nose. (00:02:50)
Continuity mistake: Before Julie gets her knife and cuts Will with it, the camera zooms out and you can see her go for the knife and not get it, so they make you think she actually is supposed to go for it the second time. (01:24:00)
Continuity mistake: When the four are walking to the hotel, as they walk under the outdoor archway, Tyrell's glasses move from up on his head, to on his nose, to back up on his head between shots. (00:25:50)
Plot hole: At the end, Julie doesn't notice the muddy footprints on the floor or wonder how the window got open? And Ray doesn't say a word when the bathroom door shuts by itself?
Other mistake: Toward the end of the movie a helicopter with a US Coast Guard paint job shows up. The island is in the Bahamas, which has their own Coast Guard, it is highly unlikely the USCG would be the ones responding to the island.
Answer: I believe it was supposed to be a surprise plot twist, I don't remember there being any indication that Will was setting them up.