In those days it took about a year, maybe a year and a half.

Many teams would carry a core "operating system" (really a library of system routines/process scheduler/IO/audits) from game to game and build off of that. That left more time to write the game mechanics and choreography.

I also didn't know they did motion capture for Mortal Kombat. That's even more impressive considering they only had a team of 4.

Was it motion capture (driving a 3D model from sensors) or was it video capture (making sprites from videos). I believe it was the latter. MK's photographic realism really made it stand out in the arcade.

You're right. Here's the relevant paragraph.

The team switched from digitized actors to motion capture technology (the quote is incorrectly referring to Midway as Acclaim): "To make the characters in video games more realistic, actors are being recruited to serve as models. Acclaim, the video-game company that made Mortal Kombat, has created a special 'motion capture studio' for this purpose. A martial-arts expert with as many as 100 electronic sensors taped to his body sends precise readings to a camera as he goes through his moves—running, jumping, kicking, punching. The action is captured, digitized and synthesized into a 'naked' wire-frame model stored in a computer. Those models can then be 'dressed' with clothing, facial expressions and other characteristics by means of a computer technique called texture mapping.

MK1-3 were 2D characters, all done with video capture. MK4 was a 3D camera-based game and was done with motion capture.

There were other 2D fighting games around that time that used video capture (remember Atari Pit Fighter?) but MK avoided the sprite scaling and kept it flat.

I'm pretty sure the original was done by digitising video frames & tidying them up. There probably weren't many people doing motion capture as we know it today in 1992.