I had/have the same issue, I have a 25" horizontal and on some very games I lose part of some vertical game at the top and bottom. In Pac Man, for example, I can't see the fruit at the bottom, or the words Score and High Score at the top. This doesn't bother me much, so I haven't done anything about it. In Tron, though, I lose a considerable bit of the screen, I can't see the bottom row in the tank-maze, or the bottom wall in the light cycle. What I did for this was change the resolution using MAME32(right-click on the game and go into properties, then it's the Advanced tab I think), I just experimented until I found the best one. After I did this, the settings stick when using regular MAME. Unfortunately, changing this makes the game less sharp, so I had to try maybe 20 different resolutions before I found one that let me see the entire screen that wasn't really bad looking.
I had to do the same thing on another horizontal MAME I built, so I guess it's just a by-product of how many lines are available on the monitor?