I'm not sure how there is even an argument here. Onboard video (REGARDLESS OF THE CHIPSET MANUFACTURER) consumes some of your computer's RAM to operate (i.e. if you have a 64MB onboard graphics controller and 512MB of RAM, you in effect only have 448MB of RAM).
In a low-end machine (in particular) where memory might be at a premium, there is a sacrifice being made there, in addition to the fact that an onboard card will steal some additional CPU cycles as well.
If you're running a game that is taxing from a memory/CPU perspective, you're better off with a dedicated video card vs. onboard.
I don' think anyone has said that onboard is bad here - but if you have the choice/budget, dedicated (even if it is just a cheapie) is going to serve you better performance-wise, for MAME or other applications.