Noob sends Frost after Sub-Zero. Sub-Zero defeats her easily; Noob then kills her for her failure, and when Smoke refuses to attack Sub-Zero, Noob kills him as well. These two actions would be enough to enrage Sub-Zero to the point to have him fight his brother in a battle to the death; Sub-Zero would emerge victorious.

You thought well on it SubMan, and that's good.
It would all make sense if the characters had such personalities. Unfortunately, they don't.
Also the way things are going doesn't quite match up to your story:
Ahsrah has already defeated Noob Saibot (didn't kill him though), and there's no way in hell she's going back to Hell.
Smoke's "soul" has been lost somewhere within him again, which would explain the Noob-Smoke alliance: Smoke doesn't know what the hell's going on.
Between Frost and Sub-Zero, Frost was the only one who of their heritage, hence the fact that she wanted the medallion so badly: she wanted to be like her ancestors.
Sareena simply used Sub-Zero as a pawn to get away from the Brotherhood of Shadow, which is what she really wants.
Noob Saibot will have to find some other means for warrior-making, due to the fact that Smoke's case of insanity in the Netherrealm proved that he has found his "soul" and will immediately ascend from Hell.

Frost turning into a wraith sounds pretty cool actually. After being released from her ice prison, she could then start to hate towards Sub-Zero. A quite possible reason to hate him is from confusion, perhaps she thinks that Sub-Zero tricked her into stealing the medalion, thus wanted Frost to freeze? he could then start to go down the path of Noob-Saibot, for they both hate Sub-Zero. Noob-Saibot would help make her a wraith, as she swore loyalty to him. With the Frost being Sub's and Noob's sister, I don't think that will fit out too well. Nor do I think it will happen.

Sareena shouldn't really get involved in this whole mess between Sub-Zero and Noob. Nor should Kenshi as you stated above. Both would just get in the way of the whole storyline.

I agree to where he should be a big role in this story, but having him up being dead in the end doesn't seem like a good idea to me. Smoke has been nothing but a controlled cyborg. He needs his own story and his own personality. Thus he should carry on to MK8 and be one of the most popular characters there.

Ashra should indeed be hunting noob, but having her die and then being avenged by Sareena wouldn't fit my above posts. I think she should die in the attempt to stop Noob, but having Sareena not involved in this, Ashra won't be avenged IMO.
With Scorpion not being involved I think that is smart to consider. This is Sub V.S. Noob. Not Sub V.S. Scorp V.S. Noob! Leaving him out of it would be for the best. Excellent thoughts dude!
BlAcK-RoSe

I think that Smoke and Noob will fight some how, while Sub, Scorpion and Quan-Chi get involved as well.
I foresee the possibility of Frost and Sareena getting involved some how but not sure which side and how exactly.
Scorpion should work together with Sub-Zero, I say Noob, Quan-Chi, Scorpion, Smoke and Sub-Zero will have some kind of huge circle in this but honestly not sure how it will end.Someone will die but I don't think it will be Sub-Zero or Scorpion.I hope Smoke survives.

Quan Chi used the Lin Kuei to get to the Shinu Ryu to destroy them.
That would be the little connection. The problem is, why did he want to kill them?

Here's a GREAT GREAT idea I had for Sareena...
What if Noob Saibot fashioned a Fake sword like Ashrah's, which Sareena used to try and ascend from her demonhood, but the sword actually drained her of her energy, and eventually killed her. That would make Noob look like a rotten s.o.b., which I think is their intention.

Noob Saibot will have taken the throne of Hell and his power will increase.Smoke will still in his service, but his true loyalties are an enigma. Noob will have recruited Frost to use against Sub-Zero and Drahmin and Moloch as his bodyguards. With an army growing, he'll solidify his power and concentrate on eliminating whatever connections to his past life remain.
Ashrah, having failed to destroy Noob Saibot, but discovering his true identity and learning of his plans, will seek out Sub-Zero to warn him and perhaps form an alliance. However, this will be when she learns of Sareena's presence. She'll either assume Sareena's evil and attack or realize Sareena also just wants freedom from the Netherealm and try to help her, seeing a reflection in Sareena. Or she'll attack THEN try to help.
Learning of Noob Saibot's true identity, Sub-Zero will perhaps make a brief attempt to return his brother to his former self. However, Sub-Zero will quickly accept his brother his gone and make it his mission to destroy Noob, disgusted with what his brother has become. However, Sub-Zero will be more concerned with Smoke and Frost who are in Noob's service and try to save them...which Noob will gladly take advantage of.
Sareena, however will be shocked and devestated to learn of what became of the original Sub-Zero. Noob, seeing her confusion, will secretly offer her a place by his side, playing on the feeling she may have for him and offering her promises of power and assuring her he won't treat her life Quan Chi and Shinnok did. Sareena will be torn between her hatred of the Netherealm and feelings for Noob and the promise of power. Ashrah however, will try to keep her on the good side, telling Sareena of the Kriss which can purify her.
Meanwhile, Scorpion will also find himself confronted by Noob Saibot and will be shocked to learn his true identity. Noob Saibot will either simply want Scorpion dead....or since he's proud of what he is, will offer to let Scorpion join him; giving the "We're the same, we should be working together" routine. Scorpion however, will want nothing to do with this and vow to destroy the evil he helped create.
Quan Chi, weakened by the loss of his Amulet, will remain in the shadows, waiting for the right time to make his move.
During the final battle, Sareena will ultimately decide to help Sub-Zero, saving him from Frost who remains on Noob Saibot's side. Ashrah will kill Moloch which earn her assencion from the Netherealm. Smoke will finally resist his programming and sacrifice himself to help Sub-Zero. Scorpion will appear and he and Sub-Zero will find themselves in an unlikely alliance against Noob Saibot. Scorpion will however, will get sidetracked by Quan Chi, who will make his move.
Finally, Noob and Quan Chi will be destroyed. Sareena will move on to form a life for herself and Scorpion and Sub-Zero will return to participate in the big battle against the big evil.
And then Drahmin will emerge as the new ruler of the Netherealm for the next generation.
If I had my way, there'd be lot more twists and turns than that, but I've no idea how they'd fit in all in one game....so I'll leave it at that.

Okay, here's my defence:
Ashrah: How can you say for certain that she beat Noob and is out of the netherrealm. She would have had to kill Noob for the effect to work.
Smoke: He doesn't need a soul. Subby can just reprogram him to work for himself as a single being
Sareena: Yeah, she might've, but remember that she risked her life to save Noob in MKMSZ? She would do the same here to try to bring back Noob. She doesn't have to give a rat's ass about Subby.
Noob-Smoke: Smoke won't ascend like that. remember, he used to be an assasain, so he must've killed someone which let him enter the netherealm.
there, I think I made my point