I'm pretty sure the 3 frames fixed lag is more of a design decision to streamline the experience for pings of up to 333ms rather than a hardware limitation. I would argue that it's not a hardware limitation due to the fact that 7 frames of rollback are already supported in the current netcode.
Honestly, I feel any game utilizing rollback netcode should implement an option for players to select their desired input lag. The argument against this is that players dont understand and usually set it to 0, causing high rollback in higher pings. Input lag is usually less detectable for players who dont know better. Imo they should included the option with recommendations. They can use the simple green bars or ping numbers. For instance, 1 frame is recommended for 5 bar connections (up to maybe 60ms). These numbers are just examples.
Even if this was just limited to private matches, I'd be really happy. I dont care about kombat league or any ranked mode in online fighting games. I'm just looking to play the game as closely to offline as I can. I mostly run sets and it would be fantastic to have this option.
One thing you learn pretty quick developing stuff is you will never, ever stopped being surprised at how easy it is to confuse your users. This is especially true when you are coming from the point of already understanding something. It's basically impossible to ever over assume how easy or often people will get lost. It's not insulting people's intelligence, it's about understanding what people know, how they process stuff, and what they can be reasonably asked of. Like how this whole post will be TLDR to anyone already not super interested in the topic of discussion.
Almost every device you use is making massive assumptions about what is in your best interests even if there are lots of little decisions you could make to fine tune it more to your needs. You can't make a mass market product, run against "KISS" and "Don't make me think" ideals and not expect to confuse people along the way. It's something that there are literal books written about, and experts hired to do planing and testing around.
Games like Skullgirls likely have a smaller, more educated fanbase than MK. They are probably (assuming here) better equipped to dig into the option and get benefit from it and not just pick something at random. In MK's case (without testing it) my assumption would be they would have to auto select the frame delay for each match to keep it simple. But then it could get it wrong given how erratic connections often are. Then you have people getting mad because the experience isn't consistent (even when playing the same person twice), in their control, and it's hard to practice for. As the game gets older, and the people left playing more comprised of hard core, dedicated types then it may become easier to add tech dials people can effectively use.
And lowering it isn't just going to cause larger rollbacks in high ping, it guarantees every frame has micro-rollbacks. Even a 16ms ping guarantees one frame of rollback, and that's not even taking in account odd variables like that your two machines aren't even processing a frame across the same 16.66ms time frame in the real world (like maybe your PS4 is processing new frames 8ms before your opponents.)
I may be wrong on this part but the benefit seems somewhat suspect to me. You would be able to react more instantly on your side, but in a lot of cases you could end up having less to react to. Say if Erron Black drop kicks. You will be able to block 2-3 frames sooner, but the same thing is happening on their end. That drop kick is coming out 3 frames sooner. Anything over 50ms and you won't see it any sooner than you do now, and you end up needing your 3 frames to react to less because when that move finally reaches your machine, it's deeper into it.
It might feel more responsive, but it introduces more startup clipping all around. I don't think there is a term for that, but in the keynote video Q&A section has a guy ask about the clipping and if it's a real thing, and I've seen Keits talk about it somewhere as well. I'm sure this all feels better on the input side, but I'm just saying there may be other associated costs for that responsiveness that could make it just as hard to react to stuff.