Well I just had a quick glance at the recent sidechain paper and they describe a "two way peg" mechanism, meaning coins could be sent to the sidechain and back to the parent chain at a later point in time. Cryptonite may be limited to a "one way peg" system because once the coins have been locked by setting the withdrawal limit to 0 you can't unlock them at a later point in time, which is required in order to send them out of the sidechain and back into the parent chain. However they do mention in the sidechain paper that Bitcoin would need to undergo a soft fork for their sidechain proposal to work, so right now even Bitcoin cannot support a two way peg mechanism. So I guess if we wanted to add support for a two way peg mechanism in Cryptonite we could do the same thing and implement a soft fork by adding some new type of special transaction which increases the withdrawal limit. Although it may not be so easy for us, a hard fork may be required. You have to keep in mind that their sidechain proposal locks and unlocks coins using the scripting system, but with Cryptonite we have to approach the problem in a different way because we don't use scripts. But yes, I believe sidechains could be possible.