I'm thinking they're gonna go with both and have it to where timelines are fighting each other, would only make since as to why Shang Tsung is back, he came over from the timeline he became a god in.
I read the speech about choice in the trailer as Liu Kang having recreated existence while giving the world all it needed for peace, but still allowing everyone to choose their own path. So, Shang Tsung would still exist, but he actively chooses to go down the path of conflict.
Since it's a time fukkery story, I fully expect there to be a point somewhere in the middle or final third where it's explained that no matter what happens, there are always going to be constants and fixed points in time, such as Shang Tsung's desire for power, some form of conflict between Outworld and Earthrealm, etc.