Mini-ITX is great for a student PC/kid's PC, or for a home-made portable or something... Home theater is pushing it, but it DOES have good DVD decoding & playback onboard. For an arcade machine? I'd have to say nah...
For my cab project, I was originally going to use my M10000 EPIA board, but I've found that performance suffers immensely from the onboard video's RAM-sharing architecture. Classics run great, though a few have sound glitches due to addressing issues with RAM; games like Street Fighter 2 and other 2D fighters work, but are sluggish when the action starts getting intense (same with shooters like Mars Matrix and Ikaruga); Forget MK or any of the games that use CHD files (massive delay on video and control response, audio echoing and delay, Area 51 is barely playable, but most are just impossible). The other issue is that the S-Video out is not the greatest on some TVs - I couldn't fix the overscan on my TVs, and the S3 config software is not too flexible either.
For reference, I'm running WinXP, I have 512MB RAM and have my video settings in BIOS maxed to 64MB shared RAM - I tried the default 32MB but it didn't make a difference, nor did software overclocking (tried it just for kicks).
For my money, I'd recommend an AMD Duron 1.8mHz / 266mHz FSB Socket-A mobo combo with a good cheap nVidia 64MB video card, as I couldn't find a game that perfomed badly on my AMD tower with a similar configuration, including MK and the CHD games - all were at near normal speed with no frameskip. That's the config that's going in my cab.
Shadowhawk