I still prefer the solid white clouds, as these don't really make sense even if they were in the original. Just my opinion.
Also, I think I have figured out something that has been bothering me about this stage specifically. The background pieces are
too clear. Unnaturally clear. Realistically, the further away something is, the more "hazy" it will appear. Like looking at a distant mountain on a clear day, it's not super sharp. It may appear slightly blue or purple essentially because of the "sky" between you and it. Here is an example to illustrate what I am talking about:
If you look at the distant mountains, and even Shang's pavilion, they all have varying degrees of this haze. Without the natural haze, the stage is going to just look like a bunch of pictures thrown together in Photoshop, which it does to me as of now. I don't mean any offence. This is a little detail that makes a world of difference. This is one of those details that will separate this project from most of the other MK Mugen messes.
I don't think the original game had to worry about this too much since it was so low-res. Since we are making an HD game, we really must account for this detail.
If I might reccommend a solution, make the mountains a bit transparent. For the Shrine and the trees, apply a subtle blue overlay. Actually, I think you might should do another subtle layer over the front. Don't be afraid of air. It won't take much to make all the difference.