Yes, interlace flickering is normal. It is more pronounced when viewing computer graphics with single pixel wide horizontal lines and will not be as noticeable in a game or with a good front end. You won't be able to avoid this in Windows, as you can't display much more than 240 lines in progressive. If you're running most of you MAME games at native res (a waste of the TV if you're not), they should be around 240p, but it's not enough resolution to work with on the desktop.
Powerstrip won't give you geometry adjustments outside of limited changes in overall size. You need to get into the service menu, and to make changes to very specific areas, you'd have to open up the TV and adjust some of the small convergence magnets on the back of the tube. If you try it, learn about discharging a CRT. Don't electrocute yourself.