It'd require UFE Source I imagine, but you'd make a separate character file with its own moveset, then alter the character select menu to handle selecting the variation based off of the character selected to get the "real" selected character.

If you want it like the earlier mortal kombats where you could stance change in the middle of the match, there's move stances available as an option in the character file. but if you want it like MKX then you have to do the above.

Any idea as to how i can make the Select screen work that way

Have you tried Grahf's solution? You can find it on this thread:
http://www.ufe3d.com/forum/viewtopic.php?id=776

I'm in the process of implementing this but had a problem with another thing I'm trying and got stuck, so I don't know if it's working since some replies to this post suggest some problems.

Bump

You have any idea what files I'd have to mess with?