I guess my question is about how the JPAC reads that signal - or if it reads the signal? Or do I have to run the credit button using one of the extra JPAC inputs and then map that button to register a coin using MAME?
The J-pac takes the coin "signals" from the Jamma connector.
P1's coin slot is pin 16 on the parts side, and P2's is pin T on the opposite side.
You could wire up a button straight to the J-pac's "auxiliary" connections, there are 5 screw-in connections per player outside of the Jamma edge that are for the non-jamma standard buttons (aka Kick Harness connections).
Then just configure Mame to take coin credits from that wired button. I'm assuming there are these extra connections for time when people have more than the 2 standard coin mechs (4-player cabinets etc.) and need to wire the extra coin-mech switches to them.
Personally, I'd just use the coin connection through the Jamma loom. Having functional coin mechs on an arcade cabinet is a big part of the experience, IMHO.