If you set mame to auto resolution/auto hardware stretch/keep aspect ratio, it would then have vertical bars on each side.
Yes. I think when this came out as part of the re-write, it was checked by default and I got confused. I notice it's not default anymore.
Err, the default is to keep desktop resolution & keep aspect ratio (which forces stretch). So the default for a 5:4 monitor, rotated & running at it's recommended resolution (1280x1024), will have black bars on the slides.
Now, if you change mame's settings, or run the monitor at a resolution different from the recommended one, it's possible not to have the black bars, BUT the images will therefore be stretched wider than they were is the arcades. And if you run an LCD at a different than recommended resolution, the image will be lower quality.
So with a 5:4 monitor, either you get black bars or a stretched image. (Same idea as mame horizontal games on a widescreen.)