The real anwser.... you don't... console games are meant to be played with a gamepad. The games that do work well with an arcade controller are typically ports of arcade games already in mame.
While this is mostly valid, SNES and genesis era had a TON of side scrolling beatem ups and fighting games that work great with a street fighter layout. Games like Earthworm Jim, TMNT Tournament fighters, Final Fight 2 (3...not so much), Streets of Rage, MegaManX series, Super Punch out, and a lot more.
I believe the point howard is trying to make (and this is my interpretation) is dont make too many extra buttons and changes for games you'll rarely if ever play. Its great to have all the games in the world on a cab but if they never get played or your panel is such a mess they arent playable, then whats the point of having them?
Eh not really. You got my point BUT 90% of the games you just mentioend don't play well on an arcade cabinet. This has nothing to do with the controls and everything to do with the pacing. Final Fight series and Streets of Rage sure... those were designed with the arcade in mind MMX, EWJ... nope those games are too long, they aren't well suited for a cab. Platformers in general kind of suck with arcade controls... I think nintendo was smart to stop releasing smb in the arcade.

Super Punch Out..... well it you like losing, it's playable, but the game is so time critical that it really plays better with a gamepad.
But I'm nit-picking here.
Yeah that's exactly what I mean. You build your cab around an average of what most games will need, you don't build it with the intention of having enough buttons to handle every game and situation possible. Otherwise, like you said, you've got a hot-mess that isn't playable.