We had a free original Mortal Kombat game in our break room at Berkeley Systems for a year or so way back when. After you started to get good at it the character imbalances became painfully obvious, some had fatal flaws while others had unblockable attacks that could be used to dominate (I'm looking at YOU SubZero!). But Scorpion vs. Scorpion battles became epic, he was the only character we'd play after a while.
I think I'd have to go with 2 as the best of the series. It fixed a number of the balance issues while adding some features without loosing the feel of the original. Version 3 started diluting the formula, the simple, fast and brutal fighting that made the series stand out, to the extent that it did.