Interesting thread. Just for the fun of it I built myself an arcade machine last summer. It was a lot of work but I really enjoy that kind of stuff. Conveniently Happ Controls is just a few miles from Motorola so I was able to place orders and pick the stuff up on my lunch hour. The people there are really nice, and their warehouse is pretty awesome.
Some good info: get to know
http://www.arcadecontrols.com well. They have a good forum there with lots of helpful people, as well as links to design plans, control wiring information, etc. When creating your control panel, don't try to hack a keyboard - it just won't cut it. Save yourself the time and trouble and get a keyboard encoder from
http://www.ultimarc.com/. Nice & easy.
Make sure you do your research on the legal issues. The general consensus seems to be that operating a emulator-based arcade cabinet for profit is tough to do legally. I don't think the above comment about abandonware is correct. Unless I'm mistaken, even if a game seems to be abandoned, you do not necessarily have any right to use or copy it.
Finally, have you considered the cost? It's not cheap to build one of these. When you add up the control pieces from Happ, plus the cost of the computer, plus a TV or monitor, plus either the wood to construct the cabinet or the cost of an old cabinet for retrofitting, plus a whole bunch of "miscellaneous" expenses that will pop up, it gets to be a little much. I didn't add up exactly what I spent (I really didn't want to know...), but most other projects who did add it up claim about $600 minimum, more commonly $1000 and up.
Attached is a picture of my nearly complete cabinet. Let me know if you decide to do it and have questions and I'll see if I can help.
{edit} No list of awesome video games is complete without Galaga. {/edit}