Hardware strecth will take a performance hit on older video cards. If you're not running a GeForce 2, Matrox G450, or Radeon 7000 or above, this is likely the problem.
The good news is that it should not be needed for most games. Allow MAME to select the resolution automatically, or try setting all games to either 640x480 or 800x600. They should fill the screen nicely w/out stretch enabled.
I the same CPU - HW strecth skipped with an ATI 3D RageII in basic games like PacMan. No problems once I updgraded to a Radeon, but I leave it off by default anyway.