I have ultimate mortal kombat 3 on a old dell with mame32fx ver 104. It skips and runs slow. I was wondering could i fix this with more memory or do i have to have a faster processor?
Depending on how slow the CPU is, it's not likely to work with mame 104. You should probably have at least 128MB of memory for windows 98/ME, and 256MB or more for windows 2000/XP. Depending on the machine, onboard sound and/or onboard video can hurt the speed a lot too, but if you don't have at least a CPU near 2GHz, I don't think it will make a lot of difference.
Don't even think about upgrading to mame 108. For slower computers, go back to mame 92 as a starting point (the last version before Aaron's big sound re-write), then try older versions if it's still too slow. I don't know what version it was but at some point, the sound in the MK series was rewritten, making it more accurate but much slower.
You should make sure that you have triple buffering turned off too.
I used to have a P4 2.8GHz CPU in my mame machine and UMK3 would often stutter and skip when I had triple buffer turned on and there was a lot of sounds going on at once.