According to the story in MK2, Shang Tsung was banished to Earthrealm with Goro to try and take it over for Shao Kahn using the Mortal Kombat tournament.

Now it took Shang Tsung 500 years before he was beat by Liu Kang in the 1st game, 11th tournament (i think). That leaves 500 years worth of prequels that Midway could cover. Instead of thinking, what happens next, they could think, what happend then. I know it would get boring and be unlikely that Midway would spend the next 5 or 6 MK games on prequels leading up to MK1, but a prequel 500 years prior to the first game would be a good start, and if it got popular, then they could fill the middle with whatever they wanted. As long as it led up to MK1's story.