Windows can push a 240p desktop no problem if you set it up, but some programs just won't be useable or configurable because you can't see anything. Any standard arcade chassis will handle a range from ~15.4 to 16.2kHz quite happily, and probably slightly beyond. Setting modes like 800x600@50i is entirely possible, and while they flicker they make some programs workable, i.e. those that only display their windows at a certain resolution. I set up some arcade cabs for the first time, using GrovvyMAME, and then found out I wanted more emulators, which meant more configuring, which meant more programs required, which meant I had to be able to see far more real estate than 240p would allow.
I use a standard 640x480i desktop unless I need to go higher, and my frontend uses that because while it would work fine at 240p it would look like ---steaming pile of meadow muffin--- and the pictures and vids would be so downscaled they wouldn't do the games justice. I then set most emulators to use a 240p mode from those I have installed.
If you're setting things up from scratch, I'd recommend Win 7 and crt_emudriver running on an AMD Radeon HD 5000 or 6000 series card. This setup currently outdoes Arcade VGA's, and the cards can be picked up much cheaper secondhand from Ebay or Gumtree/CL or whatever. There's a forum on here for GroovyMAME, which is superb, and guides for it, and for the 5000 series (and up to the 7000) Radeon cards, along with the crt_emudriver download, at this site -
http://geedorah.com/eiusdemmodi/forum/EDIT: Shameless bump, but have a read of the following thread too -
http://forum.arcadecontrols.com/index.php/topic,152969.0.html. You might want a JPAC if you're not sure how you're going to interface your PC video output with your arcade chassis, but mostly there's a bit of info about picking a Radeon card and stuff.