Scanlines flush colo(u)r - is this normal, how can it be fixed?

[darthbane2k]

In preparation for my cabinet, im testing things on a 17inch PC monitor. Im going to pick up a 21 inch PC monitor this Friday for the final project.
My question is one of replicating a look of a arcade monitor. I know Arcade monitors are the best way to go but truth is, its not an economical choice for me. I also cannot TV-Out on my graphics card.
So, without any Direct 3D trickery I get a full screen but very blocky (and less defined) look, yet very colo(u)rful.  When I enable scanlines at say 50%, the images become more crisp, animation looks closer to the original arcade, things are not so blocky yet the colo(u)r (and perhaps even the brightness) looks a little flushed out.

My questions are

1) Is this normal behaviour when Scanlines are enabled
2) How might one remedy this behaviour
3) Any specific filters/settings recommended for PC monitors. Any success stories out there? I have used the search function of the forum but did not see any concrete opinions.

Thanks

Bane.