As mwong168 mentioned this is highly depended on what you are using the machine for. I started out with a Pentium 4, simple machine that I got for free. It was around 2GHz CPU and 1 GB ram ... running windows XP (32) and using a pretty basic video card ($30 or so). Performance on pretty much all classic games was just fine, however obviously any game using a CHD or even most newer games for PC (Street Fight 4) didn't run that well ... also the Hyperspin Fronted was a little laggy.
I started reading and found out that you can compile mame to utilize some amount of a dual core CPU, also MAME runs alot better with a 64bit version. After experimenting with Windows XP 64 (which isn't a true 64bit platform) I realized that Windows 7 was really the only way to go if you are really trying to get performance out of those CHD games. So I upgraded everything, and spent a pretty penny ... See my footer for current specs. I fortunately got the CPU and Motherboard for free (gift cards that were going to waste) so it wasn't so bad, but i think it would be better to do something in between spend less and forget about the CHD games (even with a 4.5GHz they still don't all run 100%).
the Arcade VGA 3000 works great if you have an arcade monitor, nice easy solution. I have tested the Arcade VGA on Dirt2, Streetfighter 4, and a few other modern games and it handles them all fine.
As a side note, there are two current problems I have found so far with using windows 7 vs XP ... 1) You cannot 100% strip the loading and customize it for mame. 2) I haven't found a way to increase the mouse polling rate (for spinner games/360 wheel games).
Other than that, everything is moving toward the newer platform, and things won't stay on XP forever. (2cents).
I'd stay away from the newer i5/i7 and just stick with the Core 2 Duo's (which are found pretyt cheap these days ... and just get 2GBs ram). Platform up to you but 64 version run games a little better. (Side note, there is no driver for XP64 using the ArcadeVGA 3000).