mk3 took place in earth and outworld
mk:d the arenas are in outworld becasue that's where onaga's coming from

Actually, the stages are in all different realms. MK1 ones are Earth, most are in Outworld, and the Slaughterhouse is in Netherrealm.

I think ALL of MK3's arenas are on Earth, cus Outworld is invading (all except Smoke's Secret Portal). UMK3 and MKT had a mix of earth, outworld and 'in between realms' arenas.
But the 2nd part is right, Outworld is where most of MKD is taking place.

The Slaughterhouse is in Outworld too, cus in the upper part of the level you can see the dragons flying around in the background like MK2's Kombat Tomb.
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I'll give a rundown of where I think all the arenas in MKD are:
Outworld:
Beetle Lair
Slaughterhouse
Hell's Foundry
Golden Desert
Dark Prison
Lower Mines
Falling Cliffs
Quan Chi's Fortress
The Dead Pool
The Kuatan Palace
Living Forest
Dragon King's Temple
.................
In between the realms:
Nexus
The Portal
Nethership Interior
...................
These 3 are on Shang's MK1 island, a point between the realms:
The Courtyard
The Pit
Yin Yang Island
.....................
Earth:
Sky Temple
Red Dragon Chamber
Dragon Mountain
Liu Kang's Tomb
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I don't think the MK team sticks to continuity...

Pit 2 was outworld right? But the tower was Earthrealm I think. Please correct me if I'm wrong.

Pit 2 was Outworld, but I think the Tower was in Outworld too. It has a Shadow Priest and they serve Shao Kahn...

I'm personaly willing to shoot whoever thought that stage up. My money is on the person who thought Bo' Rai Cho was a good idea.
I do like having all the old stages. All though the remakes and several of the original stages tend to give off the feel of a non-story based game. What I mean is having all the old stages is cool and all but by putting in some of the imagry they make it impossible to get into the story. For example seeing and Old Shang Tsun in the courtyard then seeing a young Shang in the Deadpool. Seeing lots of the old cast locked up in the prison when some of them should be dead or somewhere else.
MK has the best and most original stages of any fighting game. I like haveing the old stages but it would maybe have been better to bring them back in game like MK triology where its all about cramming in kontent and story isn't impotaint.