Secret Missions 2 actually has a new executable: SM2.EXE instead of Wing Commander's WC.EXE. This new EXE incorporates multiple changes and fixed a couple bugs.
With a bit of file copying, it is possible to run the original WC and SM1 missions with the new EXE. However, the Dralthi will be the Mk II version (with mass drivers, more lethal) and all references to Bossman and Paladin will have Doomsday and Jazz displayed instead.
It's clear in playing this that they were already deep in development of Wing Commander 2 and intended this to segue into the sequel. Bluehair suddenly becomes a lot more talkative, actual characterization starts to occur, and some rather sly bits of foreshadowing are dropped into the plot. In retrospect, the inclusion of Jazz and Doomsday appears to have been done solely to set them up as major characters in the next game. Similarly, SM2 also features the first mention\appearance of Prince Thrakhath.
Origin had to assume that ALL characters from Wing Commander and Secret Missions 1 survived in order to continue the story correctly (i.e. retire Paladin and kill Bossman).