I've been doing some reading because I want to do exactly what you are doing as well...
From what I can tell, Fraggles boot cd uses advance Mame, and on the Ultimarc site, they specifically mention that the ArcadeVGA card elimates the need for Advance Mame and that if used together, Advance Mame will overwrite the settings that the card automatically takes care of. Try loading up DOS and using dmame with ArcadeOS instead. I'd also suggest going through the forum on ultimarcs site and the ArcadeOS forum as well, they are both linked at the top of the page here.