GameSpy have posted part 2 of their 3 part article showing you how you can build your own Arcade Machine. Part 2 focuses on the hardware you can use in the cabinet, they have decided on a Dreamcast:
With the cabinet assembled, it's time to tackle the hardware. I'm employing a PC and Dreamcast in my home arcade machine. However, there's enough room to shoehorn a PC, Xbox, GameCube, PlayStation 2 and Dreamcast into the cabinet if desired. It would be a bit cramped, but it's possible.
If you choose that route, though, you'll need to incorporate several switchboxes to make everything function without continually plugging and unplugging cables. It's best to avoid excessive wear and tear on your equipment, as well as avert the cabling hassle.
Depending on how many game systems you include and the number of inputs your TV or monitor sports, you may need an audio/video switchbox. Several options are available at an affordable price of $30 or less, the Pelican System Selector for example. Even so, while you definitely need one that offers S-Video inputs, you might want to consider a Component Video switchbox, especially if you're employing several next-gen consoles. One of the most affordable options is the Victor 521. Retailing for under $100, it supports up to five video components. Available at more than double the price, the automatic signal-sensing Model 1154 Component Video AutoSelector supports up to four sources.