It's an old argument, and I'm tired of hearing it, so I'm forced to end all debate on it once and for all:
EVERYONE loves continuity.
MYTH: People are willing to sacrifice continuity for a good story.
TRUTH: Everyone loves continuity.
RUB: As in "ah, but here's the 'rub'", here's where the REAL disagreement exists: The number one reason for disagreements is people using the same terms with DIFFERENT DEFINITIONS.
THUS: While everyone loves continuity, while no one is willing to sacrifice continuity for a good story, people define "STORY" differently.
--a tale told in one, two, three or however many issues of a series (e.g., "The Dark Phoenix Saga", "The Mutant Massacre", "The Death of Superman", "Crisis on Infinite Earths", "Secret Wars", etc.)
--the entire history of a given character (e.g., Flash, Hulk, Supreme, etc.)
--the entire history of a given character in a given series (e.g., SUPERMAN, THE ADVENTURES OF SUPERMAN, SUPERBOY, ACTION COMICS, JLA, SPIDER-MAN, THE AMAZING SPIDER-MAN, THE SENSATIONAL SPIDER-MAN, SPECTACULAR SPIDER-MAN, X-MEN, THE UNCANNY X-MEN, etc.)
--the entire history of a given character in a given series by a given writer / editor (e.g., Stan Lee's Fantastic Four, Jerry Siegel & Joe Shuster's Superman, Mort Weisenger's Superman, Julius Schwartz's Superman, John Byrne's Superman, Chris Clairmont's X-Men, Frank Miller's Daredevil, Keith Giffen's Justice League, J. Michael Straczynski's Spider-Man, Paul Jenkins' Spider-Man, Peter David's Hulk, etc.)
--the entire history of a given character in a given medium (e.g., SMALLVILLE, LOIS & CLARK: THE NEW ADVENTURES OF SUPERMAN, SUPERMAN: THE MOVIE, SUPERMAN II, SUPERMAN: THE ANIMATED SERIES, THE BATMAN/SUPERMAN ADVENTURES, SUPERMAN: THE SUNDAY CLASSICS, SPIDER-MAN, THE AMAZING SPIDER-MAN, SPIDER-MAN AND HIS AMAZING FRIENDS, SPIDER-MAN: THE NEW ANIMATED SERIES, SPIDER-MAN UNLIMITED, JUSTICE LEAGUE, CHALLENGE OF THE SUPER FRIENDS, THE SUPER POWERS TEAM: GALACTIC GUARDIANS, UNCANNY X-MEN, X-MEN: EVOLUTION, STAR TREK: THE NEXT GENERATION/X-MEN: PLANET X, etc.)
--an individual issue, episode, movie, page, panel, paragraph, scene, etc.
--any combination of the above.
In short, arguments of continuity are really arguments over why my definition of "story" is better than your definition of "story", over what should be in "The Story" and what should not be in it.