OUTLINE: This is a dose escalation study of topotecan (phase I). Patients are stratified by disease stage (extensive vs limited) and prior chemotherapy (naive vs pretreated) in phase II. Induction therapy: Patients receive topotecan IV over 72 hours and ifosfamide IV over 30 minutes every 3 weeks. Chemotherapy naive patients with complete or partial response after 3 courses, stable disease after 2 courses, or progressive disease at any time receive consolidation/salvage chemotherapy. Pretreated patients continue on induction regimen for a minimum of 6 courses unless disease progression or unacceptable toxicity. Phase I: Cohorts of 3-6 patients receive escalating doses of topotecan until the maximum tolerated dose (MTD) is determined. The MTD is defined as the dose preceding that at which 3 of 6 patients experience dose limiting toxicity. Salvage chemotherapy: Patients with extensive stage disease receive carboplatin IV over 30 minutes on day 1 and etoposide IV over 45 minutes on days 1, 2, and 3. Treatment repeats every 3 weeks for up to 4 to 6 courses. Patients with limited stage disease undergoing chest irradiation receive treatment every 28 days for the first course. Patients are followed every 2 months for 1 year, every 3 months for 1 year, and then every 4 months thereafter.