My general headcanon storyline for my MUGEN rosters goes like this:
Mathrus (yes, that Mathrus) puts forward a ultimatum, that everyone must fight their way to freedom or else die by his... uh... dragon-tierness.
My KOF Zillion game goes like the average timeline, but my KOFM and regular roster do not.
Mathrus keeps pushing random people into KOFM (because I use that one as my testing ground) and always pits Devourer Element against them to kill them and push 'em back into their main realm (my regular roster).
My regular roster is where the action happens the most, though, and characters that are removed (like the 18+ ones and the ones that crash a lot) are freed from the realm when they do their last battle.
...It's a work in progress. xD