Hmm interesting possibility.

I think the original Kung Lao will be in spirit form just like Liu Kang. In the Mortal Kombat tournament where Kung Lao was champion, Kung Lao defended his title against Goro who had Shang Tsung in his corner. Goro defeated and killed Kung Lao and Shang Tsung consumed his soul. That was 500 years before the Mortal Kombat tournament where Liu Kang became champion.

Wow, maybe "Original" Kung Lao is the being that caused Liu Kang's corpse to return from the dead? I think it would have been interesting to have Kung Lao become Noob Saibot after his death those many years ago.
I think Kung Lao "Sr." will play a role in MK: Shaolin Monks.

He may play a spiritual role to Kung Lao, but I highly doubt he will actually be a character, seeing as it takes place during Mk2