This sounds like an interesting, (and ambitious) undertaking.
I had a similar plan to this, but my project was going to be more of a cabaret machine rather than a miniaturized version of the stand-up. In the end it didn't seem possible.
My main concern was getting the game to look right. I'm not sure what monitor you're planning on having in there...but SW games on non-vector display's just hurts my soul. First, finding a working colour vector monitor is tough, and secondly, you're limited in screen sizes. I can't think of any colour vector in less than a 19" display (can someone prove me wrong on this?). So your two options would be LCD or CRT.
I wouldn't throw an LCD in it, so the next best thing would to go with a smaller sized CRT (14"?) running Mame internals. Also, people have had
lots of troubles actually receiving a yoke from RamControls, if that's where you're planning on ordering from. It's a gamble on that one for sure.
Another concern is getting the bezel to look right, that'll be a lot of work. Hopefully your craftsmanship skills are top notch, as I'd love to see this thing completed!
Good luck in any case.