Alvarez said they are still working with Sam Raimi and discussing exactly what they want to do with the sequel. He also said being a child of the 80's, he likes the idea of not knowing what is going on unless you have seen the first movie. He wants to take one character and move on to continue the story, not create a brand new one based on the premise of the first movie.
However, he does understand that it is easier said than done. The reality of sequels these days is just taking the storyline concept and throwing new characters into the same kind of environment. The other idea is to throw a new group of friends into the cabin and re-introduce the book.
It is assumed that Fede Alvarez will return to direct Evil Dead 2, but that isn't confirmed. Right now he is on board purely as a writer. If he doesn't wind up directing I assume that he will also be brought on as a producer alongside Sam Raimi and Bruce Campbell.
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