Considering the first game was extremely popular I don't see why they didn't release the other two sequels. It did make a bit of a confusing mess when FF 7 hit the market and made people wonder where all the other games in the series went to
I mean they could have done what they did with FF4; Make it easier so the player wouldn't have to grind for hours on end just to get that much stronger. I can pretty much play FF II US (FF 4 easytype) going from starting point and working my way to the next boss fight (only stopping to fight the enemies along the way) and clearing said area with little to no real issue. Not so for the original Jp games. Well, Zeromus still gives me grief so I definitely have to grind before facing him
So in that light I can understand squarenix's reluctance to release them. Kinda makes you wonder how many more games were withheld from overseas' release due to similar issues.
Well, extremely popular might be being too generous. I think the game did fairly well but you didn't see a lot of the merchandizing associated with big hits at the time. Even Dragon Quest, which did get a lot of its early entries localized, was more of a cult series than anything else in the US. And that series got its foot in the door by giving away copies of the first game free with a subscription to Nintendo Power, which would have been massive free exposure for the time I think.
Don't get me wrong I love the genre but jRPGs didn't really get big in the states until the graphics on FF7 and then FF8 blew everyone away, and they've been slowly falling back out of general favor ever since.
I'm currently playing through "Final Fantasy Mystic Quest" which touted itself as "The world's first roleplaying game for the entry-level player" and it shows. It was made specifically to try and interest Americans (and presumably other westerners) in the jRPG genre, as evidenced by its Japanese release having "USA" displayed prominently on the box. As you can see here
http://www.gamefaqs.com/snes/532476-final-fantasy-mystic-quest/images