I think screen size should be dictated by cabinet size/style, and games to be played.
If you look at nearly vertical monitors, Robotron had a 19", and alot of the fighting games had 25".
This is perfectly acceptable because you don't need to see the entire screen at once on a fighting game.
Trying to play Robotron with a 25" monitor right in your face would be very difficult because you have to pan your vision to play.
Also, if you get too close to a large monitor, you start to see the individual dots from the aperture grill, rather than the overall picture.
I'm sure there are people on here who have done it, and will tell you how great it is, but my personal experience has been that my scores increase as the visible monitor size goes down (by decreasing monitor size, or increasing distance from the monitor).
As far as playing setups go, I have had setups that have used everything from a 10" laptop screen up to a 57" wide-screen TV.
All of them are fine as long as you pay attention to the player distance as the monitor size increases.