I'd recommend a CRT, but if you want it done by christmas, better keep it simple! LCD it is, and it will be great with the rotating mount. Very nice. Do you have a project thread?
I am going to either get an ACER 27" LED monitor with 6ms or a 32" LED HDTV.
6ms, are you referring to input lag or response rate? Not at all the same thing, and input lag is not generally listed on sales websites. If the input lag is 6ms, that will be great for gaming. Just be certain; input lag is very important.
http://shoryuken.com/forum/index.php?threads/sub-1-frame-hdtv-monitor-input-lag-database.145141/You didn't list any model numbers, so I don't know if it's already something on that list.
The monitor has better resolution and the 32" is only 720p. Not sure it really matters considering the graphics the MAME will produce?
More resolution might help you when working with MAME's new HLSL effects, which will be very important in getting 240p graphics to look decent on an LCD.
I am afraid the 32 will just be too big and require to look around to play.
Probably. Unless you're standing fairly far back, the 27" will probably be more comfortable. Some people might even recommend smaller. What's the viewing distance?
I saw some state that TV can lag with more modern type games, but not sure this applies to older MAME type output?
It does.
What aspect ratio is the monitor? Keep in mind that most MAME games are meant to run in 4:3 and most new monitors are 16:9 or 16:10. You'll be running letterboxed with one of those (or stretched, which will look awful).
Whatever you go with, use a computer with HDMI out and output the TV's native resolution. If it can only do 720p, run MAME in 720p. If it can do 1080p, run MAME in 1080p.