So I got the switch going, the problem was actually the ground wire on the USB adapter side of the encoder, it was coming out of the pin and only had one thread holding it in place. Using a button would kill power to the device because the USB connection wasn't strong enough. With that taken care of the buttons work like a champ now!! this seems like such a perfect way to handle this and all you really need is a antique VGA switch box.
In retrospect I would have like to allow the video and audio switching to be controlled through the toggle as well, BUT I think I will integrate all 3 as time goes on. This cabinet is probably destined to never be 100% completed because I'll just keep throwing things into it when i'm bored.
The VGA Switch hangs down through the plywood "shelf" when the cabinet is closed up, this give me easy access through the coin door, I want to get the switching handled through the rotary switch on the control panel....but honestly its so easy this way, from a cost/benefit standpoint I'll probably put if off for a long while.
So, the pictures today are of the slide out "PCB shelf" included in the HS5, The cabinet running mario bros and making my widebody cabinet jealous with its extra 6" diagonal screen size.
I was able to get a PC motherboard, power supply, hard drive, power buttons, usb ports all mounted on the board as well. If you look carefully you can see the paths I made with the wire, I tried my best to keep audio/video cables away from power cables but Its a cramped space and sacrifices were made.
The VGA switch works like a champ...or it DID work like a champ...until I left the PC hooked through it during a reboot and the BIOS refresh rate fried my K7000

I have a HOT, Vltg Reg, Flyback, Cap Kit in the mail, Im really hoping those parts fix it. I feel like a real stupid-idiot for breaking this.
So for people following along, the socre is 5-3 with Me in the lead but the cabinet sure rams it home when it gets a point.
I would reccommend using a multi-pole, double throw switch for routing buttons from one device to another,
I would reccommend putting a PC in your NAOMI cabinet, esp if it has a CAPCOM I/O
I would reccommend sorting out PC Boot video modes before completing a project like this.
I would reccommend NEVER EVER EVER watching the windows bootup on your CRT.