My cp is 24" wide, I'm a big dude and 2 players fit fine.
Though most of the time, it's me and my 6 year old so that may not count.
First off as far as pause goes, I use my pretty often. It's really the only admin type button I have.
For my panel, I wanted my track ball so for the button layout I really couldn't go 6 buttons per player so I opted for four buttons per player in a diamond pattern. So for fighters, I stick to neo geos.
If you look around online, you'll see many street fighter 2s in cabinets such as Dynamos that have control panels less than 27" wide.
It kinda comes down to comfort and the size if the players.
And like Paige said, the players can angle a bit for comfort.