Maybe she can even appear earlier, Namco X Capcom distorted some stories to they all fit (and distorted in a exellentway), its even possible that Iris become a playable character, she can even never die in this story also, the possibilities are many. I think that they can include enemies from X1 to X4, since they did it with Tower of Druaga saga and Strider saga in Namco X Capcom.
Also they did include dinosaurs from Dino Crisis and zombies from Resident Evil, they even did a zombie dinossaur, this dino pestered me so many times lol
For Tekken they added Ogre's from Tekken 3 but added characters from Tekken 4, 5 and even one from Tekken 2, Armor King, he returned from the dead along with Rose from Street Fighter Alpha 3, remember that it game came before SF IV, so in canon she is really dead at this time.
They did Ryu turn into Evil Ryu too, but after you battle in a vulcan (or is it the hell?) with him he recover his senses and learn Shin Shoryuken, so M. Bison (Vega in JP) retreats, and he Soul Edge teleports again (I think its the 16th time that it happens). Even Klonoa, one of my favorites characters appeared with his friends from Klonoa 2 and Klonoa from GBA, but Joka that appears to be the version from Klonoa 1. Captain Commando also reeived attention. Even 2 guys without name appeared as "P1" and "P2", they are from a shooter, the player controls a floating guy with a machinegun, I cant remember the name now.
Arthur from Ghouls'n'whatever fights with bosses from the first and second games, also Red Arremer is seen more or less like in Demon Crest, not in his visual, but the atitude with honor and all. Even Dig Dug have fun moves in this game.
The thing is, Namco love more his franchises and the other companies franchises than Capcom or even Konami these days. Nintendo gives a good attention to them too. Maybe its because the two starts with a "N" that these magic happens? lol
Since SEGA is involved this time too, beware to dont have a heart attack, because Namco X Capcom is to me on par with Final Fantasy Tactics for gameplay on the board, but adding the fight combos and the story it simples wins. The only thing that Im afraid is that they didnt make an US version, so I'll need to wait to buy a 3DS and wait even more until someone discover how to mess with the region-lock, also I dont will understand the story until some fan translate it.
edit: Forgot to say thanks for sharing and give your +1. lol
Well, they did give us a hint with X and Zero's X4 moveset, but I didn't expect this to actually take place at least mid-way through X4.
EDIT: And now TVTropes tells me that Vile's going to be in as well. Guess they're just throwing in whoever.
See? Thats what I said, they distort some things to acomodate all the characters and franchises that they want to add, but in the end some facts remains.