I'm about to build a shuttle pc sometime soon and had very similar intentions as yourself.
Primarily, I wanted to:
1) be able to connect it to my upright cabinet with JPAC, PC consealed within,
and
2) take it out and play it on a mates TV with USB2PS2 controller converters.... the mobile retro box.
I wanted a simple solution, as I didn't want to have multiple configurations for resolutions for my emulators when using native arcade vs tv out w/ hardware stretching - which looks CRAP IMHO!).
I decided to purchase as 15khz RGB to S-Video convertor off ebay. Worked a treat!
I'm very picky, and was happy spend the cash and test the output, even if it sucked. Well, it didn't and it was a great add-on solution for the ArcadeVGA, especially here in australia where SCART enabled tv's are rare.
There are a few limitations.... Vertical games do not appear as nice as horizontal (more noticable interlacing), but all in all its a very good solution. The converter cost me $70AUD or so total, and I also used the Ultimarc video amp to easily interface it (15USD).
I post some more detail and pics soon to show you the results. May not be perfect for you, as you probably don't want to buy AVGA, but it meets my need perfectly, with a near perfect image, especially horzontal orientated games... even displays mortal kombat and neo geo games really well.