While I don't think the OPs heart is in the wrong place here, I tend to agree with a lot of things said here. While I enjoy and have room for a full cabinet, if this were something I didn't appreciate that took up that much space in a house and someone gave it to my kids, I probably would be in that awkward place where I was appreciative of the effort but not really receptive to utilizing it. I would be inclined to stow it in the shed or something because I wouldn't want it in my house, but then if I see these people who donated it to me often, I couldn't exactly do that without offending. In a case like this, I would far prefer to NOT have someone give me a gift like this, at least without consulting me first.
And for the "poor people" comments, if the recipients of this gift are just struggling to keep food on the table and the rent paid but aren't truly "impoverished", then as long as it is something they want and they have the room for it, their financial status has no bearing here. Now if the father of this family were here asking how to build one for under $500 and then telling his kids they can't have new school clothes because they "can't afford it", that would be something else entirely. Cost of ownership here is no different than a TV or computer, and anymore everyone has those in their house, even those on welfare, food stamps, etc.
And if the recipient here were truly impoverished, as in a family of 8 living in a 30 foot trailer parked in a field illegally, with one wage earner supporting two ailing parents making ends meet with welfare checks and food stamp cards, and a few young mouths to feed who haven't showered in a week because the water pump in the trailer is broken and they don't have the money to fix it, well then people in that situation have no need for an arcade, and if they got one they should be selling it for something they truly need because the list is very long.
It is all a matter of relativity. If you are on welfare and asking the working people of this country to support you, you really have no right to luxuries like an arcade, in my opinion. On the other hand, if you are doing your best to make it and you get the opportunity to have a luxury like this and it is not adversely affecting the people you should be supporting, then by all means you have the right to have it. It just might not be all that practical.