Board Thread:Mortal Kombat (Alternate Timeline)/@comment-5503721-20150506042812/@comment-26082987-20150506144513

Sareena, while fighting against Kitana in Jax's chapter, said "It is possible to escape Quan Chi, Kitana. I can aid you as Bi-Han aided me." Maybe she has knowledge of some process to undo Quan Chi's curse.

As for what Smoke said, Shang Tsung has absorbed several souls throughout his lifetime and perhaps Shao Kahn took all those souls, but Shang Tsung had a contingency plan in place in which his own soul transferred somewhere else now bidding in his time waiting for a new host. So there's still the possibility that Shang Tsung might still be alive.