Alright I read the whole story, and it has some holes in it.. So here's my version of stage one.. its the same story but with some tweaks..
1. Why does Julian comes to meet LFs? I mean, its rather stupid to just go and inform your enemies about your plans so that they just come and destroy our plan (which we'll do, according to the story)..
Something better would be that some mysterious guy (general maybe? we won't ever show that, but I think players will get the hint themselves) MISINFORMS Julian that LFs have found a mask.. and so Julian comes to take it back from us.
At first Julian simply asks things like 'Where is it.. give it to me..' (in short not telling them about 'masks') but after a battle and being beaten up, he tells LFs the story of masks (only half of it), and gives a demonstration of the power by standing up and blowing em off with a super soul ball (Julian wasn't napping all that time :P)..
2. The above scenario should be AFTER 2 years only.. coz, I think its pretty damn tough to include before 2 years and after 2 years sprites together.
Julian WON'T tell them where he's going but apparently some guy (maybe a new good side character?) saw the whole scene and decides to spy julian.. after the little fighters get consciousness back the good spying guy tells them about Julian, LFs simply can't believe him so .. they challenge him for a fight (or something else..) to gain trust.
3. And then they all go to the stage 2 where the ice area is.. there we see Julian already defeated by the magician, magician thinks we are Julians' reinforcements so he attacks us. After fighting and gaining Magician's trust, he gives us the 2 masks and tells the remaining full story of masks.