1. It depends on whether you use a computer monitor or not, which means if you want to play games as close to "real" as you can, you'll want to use a real arcade monitor. If you use an arcade monitor, and try to play vertical games on a horizintal monitor or horizontal games on a vertical monitor, your picture won't seem quite right. Whenever I play vertical games on my horizontal monitor, I sometimes have to tweek the vertical size in order to get the whose screen on the monitor. There are adjustments you can do to get around the tweek (I am a lazy, lazy man) but it still won't seem quite right.
2. Yeah, they should. Best way to check, I suppose, is to enable the flip and give it a try. If the picture flips when2p is up, you know you have a winner.
3. Hm. Not sure on this one. My guess is that there is a way to manually flip the screen, but I'm not certain how to do it. Someone with more expertise than I can probably answer this question.
4. Depends on how you want to lay out the CP, and whether the monitor is horizontally laid out or vertically laid out. If horizontally, you will be playing on the "long edge" of the cocktail and therefore will have more room to play with. It might be a bit cozy with a buddy along side you, though.
5. Depends onwhat YOU want to do. I am a "keep it simple" kind of guy, so I am in the process of building a vert cab for vert games. I am not overly unhappy with the way vert games look on my horiz monitor, but your milage may vary. You are certain to get diverse opinions on this, however.
Good luck on your project!