1.What Joysticks should i get for street fighter?
I have owned a few of these machines, and all of them had bat-top microswitch joysticks. I am not really a big fan of any of those sticks though.
2.With the button layout for streetfighter, what ipac should i get?
The I-Pac2 is all you need for a 2 player panel, I have the standard SF2 layout on one of my machine's panels, and that is the encoder I use (although I opted for long handled Wico leaf switch sticks).
3.what kind of wood should be used? how thick?
What kind of wood for the control panel, or for the entire machine? People here love to use particle board and MDF, but I say both are junk, and 3/4" plywood is the only way to go.
4.should i put plexiglass over it so i dont get splinters?
My Amazing Mame has a wooden panel with no plexiglass, it is just painted black, and no you don't get splinters. You can actually still find original Street Fighter 2 control panel overlays, so you could just get one of those.
5.if i paint over it and not use plexiglass, is it still good?
It is still fine. Some purists (myself included) will point out that plexiglass is a non-original item on most games anyway, hardly anything came from the factory with it.
6. should i use a quick connect on the microswitch button to make it easier? if so, what size and what gauge wire?
I used to just solder everything, then I started using quick connects, and it made a world of difference. I don't know what guage wire I use, I always just use whatever I have laying around.
7. how spaced out should the buttons be from each other? from the joystick?
The buttons should be almost touching. You can eyeball it, or do a bit of reading around on this board, and someplace you will see the exact distances. Distance from joystick does not matter, as it is impossible to get them "too close" to the stick, and getting them "too far" would require a pretty freaking wide panel.
Let me once again reccomend getting a Streetfighter 2 (or other 6 button fighting) control panel overlay, that will answer most of your questions for you.