I haven't tried using regular DOS Mame with ArcadeOS since Mame 0.37, but I haven't had a problem using AdvanceMame.
My cocktail setup is using ArcadeOS 2.50 (I think) and AdvanceMame 0.66 and it works beautifully.
AdvMame can take a while to configure correctly, but if you're using an arcade monitor the results are well worth it, since it uses perfect video modes with no stretching. Also, all the video modes can be tweaked so games are diplayed exactly as you'd like. You can download older versions of it
here and Las Vegas wrote an excellent guide to getting it set up right
here.