I also have two "video controller" devices with the new ArcadeVGA. One I installed as ArcadeVGA, the other I just disabled, as I couldn't get it to recognize the device as anything. I hadn't asked because I assumed I'd set up something wrong in Windows XP, but in retrospect it was a pretty clean install.
However, beyond this device manager oddity, I've not had the problems you describe. Some notes, though:
* Do NOT use Windows' display properties to change resolutions. It will screw it up. Use the little Galaga taskbar icon instead; that will choose appropriate resolutions.
* To stop the flickering at high resolutions in windows (640x480, 800x600) install the "Wells-Gardner D9200 Utility" linked to
here.
* To tell MAME to use the proper resolutions, get the ArcadeVGA Resolution Tool from
here. There's another tool that does more or less the same thing, but I like this one better.
* No reason to run MAMEWah at 640x288. 800x600 looks just fine.
Note that I'm a newb myself; I may be wrong on one or all of these. But I've just gotten the same setup working on my end (Slikstik cab comes on Thursday!) and, with the exception of some monitor problems that I've decided, after getting it replaced once, to just live with - Kortek's QA department must serve free booze or something - things seem to be working fine.