Here's a hint on where to find all the ki 1 & 2 files you will ever need: Read misfits138's post on page 17 of the "Killer Instinct, i need *your* help" thread. He doesn't give a link, but pretty much points you in the right direction.
Edit: I have already converted the ki.chd files to img files, downloaded Xboxgeek's suggested Hex Workshop v4.10 program, added the hex strings, reduced the file size of ki2.img to 419,586,061 bytes, and still managed to get Killer Instinct 1 & 2 to load. I just thought I would save some of those that are having some difficulties the extra trouble.