"Modular" usually means having a variety of componets that can be assembled to make up a control panel in any number of different configurations.
It sounds like you are considering swapable panels maybe?
The advantage to making a closed box would be that you could pull it off and use it somewhere else easily, like taking it to a friends house.
The disadvantage would be that it will occupy more volume -- that might not be a problem, depending on the cabinet and what else is in it... I think you'd be more like to run into issues if you wanted deep components like a rotary joystick, and if you also had a coin door.
If you were going to make modular panels, then housing each component in it's own box would use up a lot of space.
Bob