Dont be torn .... you can find cheap 27" TV's in the classified section of your newspaper easily (or at least I can all the time around me) since people are moving towards wanting thin plasma screens. Getting a nice Sony or JVC TV with S-Video out can be found near me for about $50 to $70 only. This is a great deal and would look much better in a cabinet compared to a 19" computer monitor. You can also search craigslist.com for sales in your city.
I never understand why people worry themselves over an extra $100 to $300 worth of parts or enhancements for their cabinet. I mean if you are going to build this cabinet from scratch and intend to keep in around for a long time, then the money spent is pretty minuscule in relationship to how long the cabinet will be in the family. If you can not afford an extra $100 to $300 on a cabinet, you probably should save your money for more important things ... like food, clothes, etc....

Ok, just my opinons of course........ but go with the TV ..... you will love it.
PS: You will need a video card to connect the TV to your computer, but dont worry, you can find one for about $20 delivered on Ebay since Mame does not need the top-of-the-line video card.