i don't have an x arcade, but a custum buiilt cp with ipac.
Dont't know which encoder is in an x arcade.
I read the posts you mentioned, but no-one talks about your os.
Since you don't have the problem in dos, your pc hardware is good (normally).
Try getting a version of win98se and try then.
My best guess.
I don't think it's a bios prob. Bios normally beeps at startup if there are problems.
Your system is fast enough, so normally keyboard buffer underrun shouldn't happen, unless you have a crappy os.
Just my gut thoughts,