It would be nice if the frontend provided an option to play the intro movie at it's original size, wiithout expanding it to full screen. I haven't seen a way to do that in Mamewah. Hey, another wish list item! :-)
Meanwhile, if you don't mind a large black border around your intro movie, you can always take a lower resolution movie such as arcade84.mpg and run it through TMPGEnc (do a Google search) to create a 640X480 movie with the original movie centered in the middle of the screen. It takes a bit of playing around with settings, but it can be done, and it is one way to get rid of the pixelation.