Well I want it to be able to run any kind of arcade rom i throw at it. I'd be very sad if I go to play Galaga and it doesnt work =( Emulators would be cool, too...
edit: also, i would like to have a functional coin mech, is that possible for an xbox? Also plan on using a PC monitor as a screen, so I assume XBOX helps with that.
The coin mech is just a switch like any other so that doesn't matter- it can be PC or Xbox. One of the things folks like about coinops is that is comes as a package with everything you need= minimal configuration. Emus are the same, easy as hell. It runs older systems fine but can be a bit clunky with N64 and Playstation 1. There is not playstation 2 or dreamcast or anything newer.
If you mean old CRT when you say old monitor, that isn't where the xBox shines. Were is shines is on an old CRT TV. I have been using component (red, green, blue RCA- not yellow) in on 480i CRT TVs I get for free on freecycle or craigslist. These feel more like old skool arcade monitors than a higher resolution computer monitor. component video on TVs from the xBox is plug and play. it is a huge pain in the ass to do on a PC.
I have modded xBoxes to run on VGA but that is more complicated than using a PC for sure.
The downsides is that it costs quite a bit more than using a PC and your whole setup is tied to a relatively antique piece of hardware.
As I said, we will argue. I have been picking up classic xBoxes for $10-$15 lately. The only thing that is going to be any less than this is a super duper "antique" PC with an old ass OS. I use the KADE for encoding (I'm a part of the team that develops it) and I'm in no way tied to the xbox. I use the same KADE hardware on xBox, computers, android, Playstation 1/2, and others.
If you have some extra $$$ to spend or already have a PC that can manage Playstation 2 emulation (very CPU intensive) and you don't mind maintaining and tweaking many many components of the OS, frontend, and emulators, go for the PC. It is much more flexible and can be much more powerful. If you want to see what you can do with an xBox, look for one and a TV with component video in and give coinops or Vision a try.
Give this series by Degenatrons a watch for some background: