I am certain that playable Octolings will be saved for the sequel. Everything else has an in-game reason behind it, and this wouldn't make sense in their universe. Rather, I'll bet that if they're making a Splatoon 2 (and I'm sure they are), the story will involve a common enemy terrorizing both Inklings and Octarians, and they will team up to fight this new threat. Or rather, ancient threat, as I'll also bet that the enemy they're facing is also the one responsible for the rising sea levels.
Here's a WMG I wrote upon TV Tropes:
The flooding and the intelligent sea life were both deliberate. And not by humans, though humans became the victims of them. Rather, a civilization from another planet had been looking for another planet to call home after space had run out on their own, but they can only live submerged in low-salinity (but not salt-free) water and chose Earth as it's the only planet they can find with liquid water and a suitable temperature. With their extremely advanced technology, they teleported water gathered from other areas of space and, over a very long period of time, put it all on Earth, hence the rising sea levels, which would explain why there's more water on Earth than it should have and why this excess water doesn't get forced under the crust via plate tectonics.
As they chased the humans off the planet (or killed them off, indirectly or no), they began to colonize in the ever-deepening oceans. However, they discovered Earth has abundant sea life, and using more of their technology, accelerated and guided their evolution to become amphibious, then to live on land, to safely get them out of the aliens' way. The truth, however, is that they don't care one bit about any other life form on Earth and want it all to themselves, intending to submerge every last bit of land so that they can use it. The Octarians, living underground, have somehow stumbled across scraps of this ultra-high technology and have reverse-engineered it to a limited extent (but without fully understanding electricity), hence their more advanced devices.
This extraterrestrial civilization underneath the waves will then be the antagonistic force of Splatoon 2, where Cap'n Cuttlefish will discover something weird in the oceans that leads him to this civilization. Inklings and Octarians will team up when they learn the horrifying history of this planet and fight the aliens' forces to drive them back, realizing the Ancient Turf Wars were the aliens' fault. In doing so, they will hopefully lower the sea levels to open up more land to share, especially as the aliens have no intent to share themselves. The direct result of this is a split among different cities with different cultures, architecture, music, and climates. But Splat Wars will still be popular in every region with a lot of Inklings and Octolings.
Not really. Nintendo is the company LEAST inclined to explain things, especially when Miyamoto's behind the wheel. Super Mario Galaxy's Rosalina story wasdone behind Miyamoto's back, and he was NOT pleased when he found out it was present on release. Miyamoto was also the one who excised Paper Mario: Sticker Star into a simple Mario vs. Bowser story.
Splatoon is more the exception, where the only senior guiding hand was the late Satoru Iwata, and from what I've seen, he never cared how much or how little explanation there was in the games.