Supposedly Gen did something similar in the SF1 tournament. Where he could have defeated Ryu if he’d wanted to, but was more interested to see how Ryu would fair if he continued to advance.
I think it’ll just be about his story before SF3. We’ll probably see Tom throughout his story since that’s his close friend. My guess is he’ll enter the tournament that’s going to be hosted by Karin and fight some people there.
This is what I find pretty funny: In a game where you can choose your fighter, you can of course imagine all kinds of scenarios since many fighting combinations are possible. So one fighter dropping out of the tournament is not a big issue.
But in SF1, your only fighter was Ryu. It was never possible to have a fight like, for example, Birdie vs. Retsu.
Which means the opponents are the ones that appear in Ryu’s bracket. So, canonically, the tournament should go like this:
Ryu vs. Retsu
Ryu vs. Geki
Ryu vs. Joe
Ryu vs. Mike
…
Ryu vs. Adon
Ryu vs. Sagat
But then they decide to make one character completely unknown to Ryu in a later game.
Which basically means: Gen’s appearance in SF1 is non canon to begin with: He never fought any of the fighters from the game and dropped out before Ryu reached him.
Which is…a bit stupid in my opinion.
If Ryu never fought Gen and if Ryu is the only playable character in the game, then Gen shouldn’t be in the game at all. Just like all the other fighters that Ryu never fought and that we never saw, like the guy who got defeated by Geki, the two guys that got defeated by Joe, the three guys that got defeated by Mike etc.
The tournament aspect in itself is not the problem. The problem is that you have only one playable character. This, by default, means that all the computer opponents are the fighters that this character went through. So, if they decide then that Ryu never met Gen, well, that’s a bit strange.
Unless Ken participating in the SF1 tournament is canon. In this case, Gen could have been one of Ken’s opponents. But as far as I know, the current canon says that only Ryu was in that tournament.
Personally, I would love to see them redo the story of SF1. If SF5 ever reached the point where it had all of the characters to do it, they could do it as a special Story Mode, and I’d like to see it structured like this, with the player always playing the winner of each match:
Prologue: Ryu and Ken having a friendly match before leaving for their respective events
Ryu vs. Ken
Act I: Qualifying rounds of Sagat’s tournament by country
2. Ryu vs. Retsu(Japan Semifinals)
3. Ryu vs. Geki(Japan Finals)
4. Balrog/Mike vs. Cody/Joe(US Finals)
5. Eagle vs. Birdie(England Finals)
6. Gen vs. FANG/Lee(China Finals)
7. Sagat vs. Adon(Thailand Finals)
Act II: Ken at the US Martial Arts tournament
8. Ken vs. Rufus(Rufus is eliminated in the first round, starting his obsession with Ken)
9. Ken vs. Haggar
10. Ken vs. Nash(Finals, Nash being a former USMA champ himself, makes sense as the other finalist, Ken wins the tournament)
Act III: The final rounds of Sagat’s tournament
11. Ryu vs. Balrog
12. Ryu vs. Eagle
13. Ryu vs. Gen(in the cutscene afterwards, its made clear that Gen let him win, which bothers Ryu)
14. Sagat vs. Ryu(the player plays as Sagat and beats Ryu in this match, but then, in the following cutscene, we have the scene where the SnH takes over Ryu briefly and he scars Sagat and wins the tournament)
Epilogue: The fateful encounter between Gouken and Akuma
15. Akuma vs. Gouken
Obviously, that lineup is set up so that the remaining SF1 characters either have to be brought back by Capcom, OR they replace them with other characters, and those SF1 characters are officially retconned out of existence. Or Capcom could do it with some(like Mike definitely), but not others(keep Joe for instance).