Well, it's been proven that Sonic 2 was built off of the Sonic 1 engine (as one of the alphas has Green Hill Zone included), but time travel was also admitted to have been in the early stages. Like you said, wood zone was a scrapped past area for Metropolis. They even used the same music.
Hidden Palace wasn't the past of Oil Ocean though. Yuji Naka said himself that the player would be warped to Hidden Palace after collecting the emeralds, for Sonic to get his super powers there. As everyone knows, though, it never came to be that way.