I like this theory.

It gives me hope that we might see the "original timeline" again. I like the original story much better, pre Armageddon. MKA was a good concept to give forgotten characters a nice update. The story sucked and the whole "final battle" thing I did not like. Overall I was disappointed with MKA after MKD was so awesome. Weren't most people disappointed with MKA?

I think that the characters that died in MK9 are dead for good barring fantastic reasoning to bring them back into the story. However I think they used this method to cut the dead weight from the early games, and then they will bring in the best of the best from the later games. This would allow some characters from MK4-MKD to exist, but the ones that were not very good or do not contribute to the new story will have never existed. This will free up some rosters spots for some well thought out, brand new characters.