Since the stated plans for the graphical production for the next MK are to be more gritty, a sound overhaul would greatly add to the effect.

Mk has long fascinated me due to its eeriness and mythical qualities, even though much of its sounds are downright whimsical at times. Most projectiles are supernaturally produced, and the sounds should present them as such, have greater detail, depth and dimension, or even silence (I'm thinking of Noob here).
With regards to strikes, characters should make different noises depending on the placement of the strike and the strength (a jab kick to the shin, for instance, should have less of a prominent sound to a kick to the face or punch to the chest). Even the execution of some strikes should have some sounds/grunts (one of the things I liked about the run feature in MK3/T). Throws should sound more tied in to the environment--depending on the surface, the landing of a body from a throw will sound different. The sound of all of these should help clearly define each character as an individual--separating them, personality-wise instead of being, more or less, on the whole, homogenous. I would like individual sounds for each character to come up now and then, that aren't shared by any other character, displaying that character's personality/resolve. For instance, after a knockdown or getting busted with a combo, Sub-Zero may make a seething sound and blow a little more steam, Johnny Cage might quickly get back up and shake his head, Baraka might make some sort of growl, Scorpion might make a short, quick laugh under his breath, etc--by this I don't mean so far as to make them "taunts" but merely individual idiosyncracies that don't effect the flow of the fight.

The stages, being of different areas/types, should have a different sound to the fighting action. In a temple/cathedral setting, there may be a greater reverb than something in a forest. In the desert, steps or jumps might evoke a sound of the shifting of sand. The choice of sounds is virtually endless, but the use of a number of them will help individualize each stage, beyond visual gimmickry.

Although it might be difficult, the music could reflect the stage of the fight. This can be done by making the audio not as a single file, but as several files layered to play simultaneously, with one instrument per track, like in midi. Strings such as the koto or shamisen could feature prominently in the opening stages of a fight, enhanced with ambient sounds, but as the health lowers, the drum track (which might be muted at the start) can be given more prominence to reflect the more frenetic, dangerous turn of the bout--a realtime equalizer, more or less, reflecting the progress. Other layers could be added so that there can be dissonance at the end, etc. Additional, more problematic possibilities include the shifting of tempo due to the flow of the fight--if two turtlers are playing, then the music will be unbearably slow--if two aggressive, fluent players are battling, the music can get extremely fast and adrenaline-drenched.

These are just a few primitive thoughts--the general idea being that a greater detail, greater personalization, greater context of setting, will help define the characters and the setting more, bringing the player into the action more with more of his senses, and help get across the mood of the game better.