One possible cause that this only effects NeoGeo in Mame is some NeoGeo chip is "running" at some speed slower that the original, due to mame does not emulate the "pausing" the chip does. IOW, mame emulation of NeoGeo is not perfect.
OTOH, if the input pauses are > than a tenth (1/10, aka 0.1) a second, propabaly not this. [shrug]
... I'd just get an Ipac or KeyWiz and rewire the damn control panel. Yikes.
That's one option, as long as he knows it's the x-arcade encoder. Test other keyboards & gamepads. Try the keyboards using the same adparter. If the probs only show on with the x-arcade, I'd say yup, change the interface.