I've no idea where they will take this for the sequel... the possibilities are endless really. It could just be a straight 'Iron Man vs Random Bad Guys' story, or there's the alcoholism storyline but judging by the tone of the first film that might be a bit heavy. Same goes for the paralysis storyline. War Machine was hinted at, but that should wait till the 3rd film if at all. Iron Man's arch-nemesis is Mandarin but I can't really see that working on film... well, not this sort of film anyway... one thing I liked about this was it was very 'real'. I mean, obviously the technology to make the suit is waaaayyy beyond anything that exists, and Stark building a life-saving mini-generator in a cave while he's hooked up to a car battery (with no sign of infection) is not realistic, but you get what I mean - it was all real world stuff, not magical.
One last thing - I am not really a fan of CGI but the CGI in this movie was awesome. There were times (especially in the desert/afghanistan scenes) when Iron Man looked 100% real.