Ryan,
Let me just mention that I'm in the UK so if you are not then things may or may not apply to you. So in no particular order here goes.
First off, are you going to be doing this project at home or at school? If at school then I'd imagine you'd have access to the basic tools required for the job and also a teacher with the relevant skills in which you are lacking. If you are not doing it at school then it might be worthwhile asking your friends if any of their parents are any good at woodworking and get help that way.
You are not really going to be able to get away from using power tools so unless you have previous experience I would strongly suggest supervision by an adult.
Whichever way you do it at some point I should think you'll need to transport the cab to school so make sure you are able to arrange that.
You of course have the usual two choices of either maming an existing cabinet or building one from scratch. If building from scratch then I would recommend buying saints book and working from those plans.
For the wood I'd go with whatever is cheapest for you to get where you are, either plywood or MDF.
As far as the electronics go you want to get the best bang for your buck. For the monitor stick with a standard PC CRT monitor of no greater than 19 inches (get the cheapest second hand one you can find). Also a cheap second hand PC.
For the control interface the cheapest method would be to hack a keyboard which you should be able to get for almost nothing. Joysticks and buttons could be obtained via e-bay or by ordering from the real bob roberts or one of the many suppliers that are around.
Keep it simple and just go for a two joystick, three buttons each panel with player 1 and 2, coin buttons and a couple of admin buttons. A coin door is nice but will add to your expense.
Photograph and document everything as you build. Will make presenting the project so much more professional. Always give the apppropriate credit to your sources too (this allows copying others work!)
Be aware of the legality issue surrounding roms. School might not like a project that breaks copyright laws. I would purchase at least one board set and just emulate that game. On that point I'd submit the project giving a brief synopsis of MAME (i.e. the history of MAME and why it got started) and all the issues that surround it including methods of emulation, interfaces available etc. Again be sure to credit your sources.
Search the forums - There is a wealth of information here and you may get slammed if you ask without searching first.
Make a budget - The only way you'll know what you can afford to build is if you cost it up front - and allow a 10% - 15% margin for unexpected costs. Once you have a budget for all the items you'll need, stick to it (and put this in the report too. Trust me, it'll look good)
As for t-moudling, it's the bit of plastic that runs up the edges of the wood. It is called t moulding as in profile it is shaped like a T. A groove is cut into the wood into which the base of the T is inserted and it's purpose is to give a nice finish as well as protecting the edge of the wood.
If the cost of a full machine is too great then why not consider just building a stand alone controller - a lot easier and a lot cheaper, or even a bartop.
Remember there are no short cuts, do it properly or don't do it at all.
And finally, don't write up the entire project as one long sentence with no punctuation!
