Arkinoid is only 224 pixles wide it doesn't take much resolution to move across that screen smoothly
you've got a billboard's resolution for a snapshot space, overkill
I'm just going to be blunt here, because it's obvious that you aren't getting it. It is not in any way overkill. You simply don't understand how things work and are jumping to conclusions about things for which data is available (in the wiki and in these forums), but have apparently not bothered to research. I will try to help you understand regardless of this, however, in the hopes that this incorrect notion does not once again take root in the minds of uninitiated onlookers.
Arkanoid is indeed only 224 pixels wide, which ends up giving you roughly 200 possible positions on the screen (there are a few less, but this number is easy to deal with). So when divided by 4 (the number of positions the firmware can decode from each spoke on a wheel) it gives you a requirement of 50 "spokes" on the encoder wheel. Follow so far?
So if you only need 50 spokes, the other 250 on the TT2 encoder wheel are just overkill that does nothing for gameplay, right?
WRONG! 
For you to be able to position the paddle at each of those 200 possible positions,
you would need to turn the knob on your old spinner an entire revolution. Now if we look at how far one turned the knob in the original game, you can see that turning the knob
120 degrees gets from position 0 to position 200. But with your old spinner, you need to turn it
360 degrees. So you have only one choice with the old spinner and that is to increase the sensitivity (multiplier) in MAME by 300%. But there's two problems with that. The first is that doing so would require you to skip two possible positions for every one you can use, thus giving you choppy movement and poor control. The second is that MAME only goes to 255%, so you can't even get where you want to be, even if poor control and choppy movement didn't bother you (and it definitely does bother anyone who plays the game with any hopes to do well.)
So what is the answer? I'm sure you guessed it by now......more resolution! To get an even close approximation, you need about 3x the number of "spokes" present on your old spinner. So why is there more than double that on the TT2 / High-Low? Because Arkanoid isn't the most demanding title in this regard. Revenge of DOH takes the requirements of Arkanoid and
doubles them.
Now lets consider the effect a larger than original knob has on the "feel" of the game. Some folks like those big ol' spinner knobs that look good, but affect gameplay negatively. The larger the diameter of the knob, the more surface that must pass through your fingers when turning it. Simple geometry. So in order to get that level of control present in the original game, you need to boost the sensitivity in MAME. And you NEVER want to go higher than 100%, because you start to skip positions.
So the answer is to have more resolution available than required even by the original.After reading the last paragraph, and considering what effect a larger knob has on gameplay, think about the effect a 6 or 7 inch diameter wheel will have. This is why the wheels are actually useful on a TT2 / High Low as opposed to the old spinner types. Arcade optical wheel controls used geared spinners to get that high resolution, and without it, you would feel like you were turning in mud due to the slow reaction times, or you would have poor steering control because you aren't able to hit every possible direction (again, caused by cranking the sensitivity up to over 100%.)
So that's it. I've done my best and I hope it helps you appreciate the reason why it's there and lets you understand how to use it to your advantage. If not, well....I tried

RandyT