My current thinking is to run book II as follows:
Attack! #1 - 4 
is training an army in South America,

spies appear in the final chapter but are all killed - they reference

as if he is unknown to
Bloodhound I 
are mobilised after

's South American base is located (by the spies), on the dossier it states that

is wanted for the death of

personnel
Attack! #5 - 7 The opening dialogue follows on directly from the end of
Bloodhound I
Bloodhound II Continues on directly from
Attack! #7.

are referenced as being busy on page 052 so it never did make sense.

defeats the

and is free to pillage the high seas with his fleet.
Bloodhound III 
regroup and defeat

and destroy his fleet.
Sea Fury 
rebuilds his fleet, which is backed up by the quotes "He must be planning some new campaign of terror on the high seas" and "I hope you like my new flagship"
Followed by:
Ambush!
Death Castle
Menace of the Baron
Death in South America
Revenge of the Red Shadows
Datafiles - We've now decided to run the remaining

and

Datafiles along with 4 customs. Sorry, Space Commander!
I've also doctored up some new "Bloodhound" logos for the
Attack! #5-7 centre-spreads, I've long suspected that someone ballsed up and used the wrong logo by accident.