Hiya Del,
I can't be sure, but I wonder if you have forgotten to check the "Switch resolutions to fit" box (referring to MameUI32 here). If not, then Mame will fit your selected res into your desktop res which, depending upon your desktop res, may result in big black sidebars. If that doesn't work, then you could post your ini file and tell us what res your desktop runs at.
Unfortunately, I can't test this as I don't currently have access to my cabs with AVGA2 cards at the moment - they are locked away in a container in the Land of Oz (Australia), as the Land of the Free (Thailand) doesn't let me bring them into the country without paying hefty bribes (which I am ideologically opposed to).
So, not to be deterred, I've hacked an old Panasonic TV with SCART inputs, soldered up a VGA-SCART cable. I'm currently using an ASUS ATI-9550 chipset video card with Soft15khz for my mame machine. Except I don't have any joysticks, so Time Pilot will have to wait for a little while.
Back to your post - on my Panasonic/ATI setup, I got big sidebars when trying to run MK3 under 640x288. Try ticking the swithc resolutions box, or editing the MK3 ini file and adding "switchres=1". On MameUI32, make this your default setting.