I would think there would have been some sort of sequel/pay or play clause written into Howard's contract (I mean, even Billy D. got paid when Schumacher cast Tommy Lee Jones as Harvey Dent), but I guess not. Personally, I think the decision to create a continuity problem by recasting important characters for movie sequels is always a bad idea--I can't think of a single time in movies or television where it's worked for me. Can you?
James Bond? Sorry, that doesn't count. While a few of the secondary actors played opposite numerous Bonds, since there's no continuous narrative in those movies, the need for continuity within the greater narrative is less impactful. One could also make the argument that James Bond as played by Connery, Moore, Dalton, and Lazenby are to an extent, different characters (It wouldn't be a great argument, but it could be made).
But if we forget about Bond, when has it worked? Dumbledore? Maybe, but that doesn't count either since A: Richard Harris died, and B: He was still better than Michael Gambon.
So what then? There were a few attempts this year, and none of them worked for me. While Katie Holmes was a total distraction in Batman Begins, recasting the role for The Dark Knight with Maggie Gyllenhaal made for an even bigger distraction--one that forced critically minded viewers to question the necessity of including the Rachel Dawes character in the sequel at all, since she was essentially nothing more than a prop designed to cut corners on character development and motivation. There was a period over the summer when I blamed that movie sucking on the decision to recast that character, but I came to my senses. It sucked for a lot more reasons than that--not the least of which was the decision to recast the role of Gotham City.
What else happened this summer? The third Mummy movie recast Maria Bello in the role originally played by Rachel Weisze. Didn't see it, but I can't imagine continuity was the worst thing that movie had going for it.
If there's anything I can say about Marvel's decision to recast the role of James Rhodes, is that at least they're trading up--Don Cheadle is a lot better than Terrence Howard. I still think it's a terrible idea, but if you're going to take the continuity hit, it's almost always better to trade up than trade down, which is what Marvel did for almost every aspect of The Incredible Hulk.
It's really a weird decision, if you ask me. In Iron Man, Terrence Howard teases the role of War Machine, and now they're going to Don Cheadle to play him? This is how the world works in this new Marvel (Movie) Universe? Isn't the whole idea behind creating a universe about creating an even greater continuity? Or is it just about increasing revenue and marketing tie-ins?
I've found that a walk down the toy aisles at Target answers that question for me.