Nintendo has shed more light on why a proper Wind Waker 2 video game was never made. They went to a different direction which is how Twilight Princess was born in its place.
Nintendo did somewhat make sequels to Wind Waker with Phantom Hourglass and Spirit Tracks. However, those two games were only available for the Nintendo DS. The Wind Waker 2 was going to be totally different.
Nintendo artist, Satoru Takizawa, talked more about the development of the series in a new interview published in a book called “The Legend of Zelda: Art & Artifacts”. Nintendo Everything translated what Takizawa had to say.
If you have played Wind Waker before, you will know that the game takes place with lots of tropical islands surrounded by the sea. It was a different take in the series as you had to sail many meters in order to get to your next destination.
The Wind Waker 2 would have been set on the land said Takizawa. It would have also allowed Link to have ridden on a horse (presumably Epona), although Takizawa admits the proportions would have been difficult with the child character model.
He said if they used an adult Wind Waker Link, it wouldn’t have helped much either. Not to mention Nintendo was seeing a huge demand from gamers to see a more realistic looking Zelda video game. They received some backlash of the art style used in Wind Waker.
Another thing that swayed their decision was fantasy-based Hollywood movies. At that time, The Lord of the Rings was popular so that’s why Twilight Princess was made instead of Wind Waker 2.
After finally playing Wind Waker HD this year on Wii U, I have to say it would be cool if they ever decided to make Wind Waker 2 for consoles. We may never see it since Nintendo are still busy hard at work releasing Breath of the Wild next year.