Yes, you could run off a CDROM and keep the other files on the hard drive. But I wouldn't recommend it. It will just increase load times and wear out your CDROM drive.
Try a Mame version somewhere around .60
The Mortal Kombat hardware games are just dogs, most other games should run just fine on a 450 using version .60. Try adding a SNES emulator and running the SNES versions instead. They are very good ports, and are a lot better than nothing. Although the Capcom and SNK fighters should run fine on that hardware, so it is only an issue if you are a real MK fiend.
Finally, pull some of that RAM. There is no way a DOS Mame cabinet is EVER going to hit 512MB of Ram usage. I don't think there are any games that require more than 128 that would run on a 450 anyway.
Also, I have found in the past that large amounts of ram like that in a P2 Era computer can actually slow down emulation. As an example, my old 500 mhz could only run (using UltraHLE) Super Mario 64 full speed if it had 128 MB of ram in it. It ran poorly with 256, and looked like a slideshow with 512.
The easiest way to test the above is to check your framerates on several different games using different amounts of ram. (Try Pac-Man, Gauntlet, Final Fight, and Mortal Kombat as test games). Be sure to hit the button to display the framerate, and then to run the game as fast as possible. (I believe F11 displays, and then F10 runs as fast as possible).
In general the best Mame version to use is one that came out back when your hardware was still hot stuff. The newer versions may have more "accurate" emulation, but they are way slower. Sure, each version adds more games, but we all know that 95 percent of the games added since around .60 have been either junk, mahjong, stuff you have never heard of, stuff that won't run full speed on anything, or junk mahjongs you have never heard of that won't run full speed on anything.