At first I thought I would use my Xbox for my arcade cabinet, it seemed perfect and looked great, plus you could load Street Fighter III, Mortal Kombat Armageddon onto the hard drive, etc etc, until I tried midway games in mame, I think MAMEOX .72 plays midway games fairly good, but then you lose a lot of other games so in theory you need to run 2 versions of mame.
If you ignore midway games then xbox is very ideal, it runs neogeo, capcom and MAME classics fairly well, plus theres other games ported to xbox such as Marvel vs Capcom 2 which no emulator supports.
Xbox Pros:
Component video connection
SFIII series
Mortal Kombat Armageddon
Marval Vs Capcom 2
Capcom Vs SNK 2 EO
Guilty Gear
Soul Calibur 2
Dead or Alive series
Xbox Cons:
Midway games dont run well (MK, MK2, MK3, UMK3, NBA Jam and more)
Requires more then 1 emulator
So in the end I decided to go ahead and use a PC for everything and still hookup a Xbox for the non-emulated games, with a component video selector box, and eventually a ipac2 xbox adapter.