to be honest my setup is not great at the moment so i am in the process of switching to groovymame
i have a P4 3.4ghz with 2gb of ram, it is 64bit capable which helps, but soon i will update to something like a core2duo 3.33ghz (dell optiplex is a good option, as drivers are available for windows xp 64bit)
if you want to keep up with mame, its approaching time to forget about pentium4 processors, and pentium dual core. avoid amd. these days i would recommend a higher end core2duo processor, which are not so expensive nowadays. if you can afford i3, i5, i7 processor, great. and running 64bit mame is important now (the 32bit users are now becoming left behind).
i am using a minipac and use real arcade joystick and buttons which i have put in a wooden box so it is like a portable arcade control panel

i am using and have a few spare crt tv's, i like around 20" size so this is all i keep. all are rgb scart (i am in uk europe).
my problem is i am reasonably happy with how everything is but i need to eliminate some input lag (which i get if using regular mame or others like mameuifx)
my recommendations are to use one of the ati video cards recommended on the crt emudriver page (currently i have ati x300.. very cheap on ebay and no fan, so quiet.. plus i am mostly interested in eighties games so dont care about 3d or gfx intensive games)
i would recommend groovymame although it can be tricky to use for new people (like me) so be prepared to read as much information as you can etc
i recommend a 64bit operating system so you can use 64bit mame. (im using windowsxp 64bit)
i recommend (if possible) to use vga to rgb scart if you can (if that is not possible then there are other options of course, but this is out of my area of knowledge. as you probably already realised, rCadeGaming is the man to help with that stuff)
i would not recommend composite video, or svideo. i dont recommend interlace either (but of course sometimes it is necessary for eg. windows desktop etc). it is not worth wasting time with lower video methods such as composite. even if you are happy for a while, it wont be long before you look at other peoples setups and realise that you are unsatisfied with yours and want something more, so it is best to aim straight for the top, and have some fun and adventures on the way
