You spell it right.

No, the cyber initiative was just an order given by the Gran Master to enhance the human warriors among Lin Kuei's lines. The original story proved that the surgical procedure was unneeded, even counterproductive, the new story line just made a mess.

The cyber initiative was already underway by the time the "first tournament" was going on. It had nothing to do with Cyrax and Sektor's performances in the tournament.

Pretty much this. Cyrax was talking with Rayden about it in his chapter in Mortal Kombat (2011)

In the original timeline by MK 2, the Lin Kuei was already starting to use more technology. When Liu Kang and Kung Lao find their temple destroyed, Kuai Liang (younger Sub-Zero) came in a jet wearing a business suit and shades talking about how his brother didn't adapt to the times and caused his own death. This was seen in the Mortal Kombat 2 comic.

The Cyber Initiative was already ongoing during the MK1 Tournament. Cyrax and Sektor's performance meant nothing. It was going to happen anyway. I'm only disappointed that we never got Bi-Han's feelings about it. Though I imagine it would be similar to Sektor's sentiments.

The GrandMaster automated the Lin Kuei so he would have total control over the Lin Kuei. He wanted to wipe out free will and stamp out rebellion [so he wouldn't lose power]