I disagree on the XP part, there's no good 64-bit version of XP (XP64 is alpha quality and lacks drivers for most things) furthermore Win 7 is fine on 4Gb.
Running a 64-bit version of MAME on a 64-bit OS gives you a ~20% performance boost over 32-bit builds which can be handy in edge cases. New hardware support with XP is starting to get bad too, it even struggles with things you'd expect to take for granted (eg. HDDS >2TB)
The processor is average, 2.8ghz clock, but it's a Celeron and they don't stack up well against the more expensive chips. There are 2D games in MAME that it will struggle with (not a hope in hell of it maintaining 100% all the time on the Cave SH3 based shooters for example, but also some less obvious cases like Photo Y2K on PGM have high requirements due to the high sync required with the ARM protection device in that case)
It will run most of the classics, but it's not going to perform well on discrete stuff (eg. Pong) in either MAME or DICE, because that stuff has insanely high requirements which increase almost exponentially with the complexity of the game (so you're probably not missing out on much, by the time we fully simulate the circuits of Monaco GP I think we'll have a new contender for slowest driver in MAME)
The intel HD video isn't going to perform well with HLSL, you need a decent dedicated card for that but you've said you don't care about the 'arcade look' anyway, so I guess you're not going to want to waste time trying to simulate it ;-)
One thing I would keep in mind is cooling, that's a very small case, emulation pushes your CPU hard, emulation of 3D systems in the console emulators will also push your GPU (part of the CPU in this case) hard at the same time, that's going to generate a lot of heat. I've found with laptops that the heat generated when running emulators quickly results in the CPU stepping down the speed to prevent overheating which can cut your framerates in half in the middle of a game. People have experienced this a lot when turning HLSL on with small form factor PCs and laptops for the same reason, games becoming inexplicably jerky after 10 mins; there's simply nowhere for the heat to go in the case and inadequate cooling to remove it quickly.
It's a 250$ machine, it does pretty much what you'd expect from a 250$ machine, it's leaps and bounds ahead of an old P4 or Raspberry Pi and will run a LOT more in MAME than either of those, but there will still be some limits.