In MK1, in the story and the game, the only ones representing outworld are Goro and Shang Tsung. That's not right. It shouldn't be earth vs itself until Goro decides to hop in. there must have been Outworlders who participated, even though they might not be worth playing as.
So I think realistically, the whole tournament would be like 100 or 200 Earthrealm fighters vs 100 or 200 Outworld fighters, since we see hundreds of people participating in the MK1 Comic.