This is how rumors grow, and this 3 head stuff is not the exception. It is obviously born out of the MK2 "3 Head Fatality"; since you can pull 2 in MK1, people (like several forum members in here) claim "it's totally possible" when it's clearly not the case.
The reason you cannot even do head + fireball + shadow kick is simple: there is like one milisec of time just before the head decap, you can do almost "whatever" and that's why it is so hard to do 2 heads, because of the incredibly restricted time and because that particular command implies f,f,f+HP (4 inputs). That's everything behind that fatality, the rest is MK mythology created by fans, just like Ermac in MK1 or Sonya and Kano being playable in MK2 for example.
People will always try to make those rumors look reasonable, like "Ermac is red because the original outfit was red, and his name says Scorpion but error makro was read on the screen, and the screen was frozen and the opponent went flying and that's where the kinetic moves came from in UMK3" people would swear they saw him one dark night when a friend started pushing buttons and everything would sound as reasonable and plausible as "in the PC version I once saw a friend who did this and that" none of them will ever be able to provide any evidence, because truth is passion for MK is bigger than reason some times.
I'm not saying 3 heads would destroy MK1HD, it's up to you guys, personally I don't really care about this particular detail, I'm just sharing what I know, and I'm ready to admit my mistake if that were the case but that video is FAKED and no baseless claim will change that fact.
As for TTT2: This project might suffer a serious delay LOL I love that freaking game, I even brought a PS3 and a HD TV for the ocation, still wating for it tho... also Dr. B's return is crazy...!!!
Back on topic, Loving the progress on this project as usual, cannot wait to see whatever you guys want to share with us, it is always fantastic, honestly. I'm a fan of this project as much as I am of Tekken.