So right around the time that Mortal Kombat (2011) was released, lead producer Hector Sanchez (better known as MK and MKvsDC's booming announcer) said that a cross over with Street Fighter was "inevitable."
However in an interview with Yoshinori Ono, lead developer for the Street Fighter franchise, Playstation Blog asked him about other crossovers asked about, specifically Mortal Kombat.
"I actually get a lot of requests for Street Fighter vs. Mortal Kombat on my Twitter feed and elsewhere," he said. "I understand why people want it, but it’s easier said than done. Having Chun Li getting her spine ripped out, or Ryu’s head bouncing off the floor….it doesn’t necessarily match."
That doesn't mean it's impossible - they could certainly PG-13 the more bloodier franchise when it goes into cooperative hands, but the possible tug-of-war over who would get to develop such a project is a little more tricky. This is, after all, why the big crossovers like Marvel vs Capcom are done with comic books and not video game companies, and it's also why Capcom and Namco agreed to have their own little competition.
I'd like to see it happen, though for now terrible mods and MUGEN will have to suffice.