Alot of newer Arcade boards are based on PC hardware anyhow, in fact, many are simply nothing more than standard, off the shelf parts in a special, secure case with the proper interface addaptors and a customized OS. Others are based on recent consoles, and are essentially suped-up versions of their home counterparts. Sega's NAOMI and Sammy's AtomisWave hardware are based on the Dreamcast for example. Sega's recently announced board is PC based, using a Pentium 4 and an nVidia graphics chip. Others are based on Xbox, PS2, Gamecube, Saturn, PS1 and the N64.

As for mass production, I would use Linux/OpenGL if you are comfortable with that environment, or shoot for WindowsXP Embeded, both on a standard PC hardware platform. There unfortunately are no available ready-made PC-based arcade platforms open to developers, but using a mame-like setup you should be able to get a good foundation. Most of the newer high-res arcade monitors accept VGA-style inputs, although the cabling may be hard-wired. Failing that, there is a card based on the Radeon 9200 chip which has been designed to output to older, standard-res arcade monitors called, I believe, ArcadeVGA. Mostly this is marketed towards mame-junkies who want a more authentic experience, but it might be useful if you want standard res (320x240, 15khz) and don't need DX 9.0 level features such as shaders 2.0. High-res, in arcade terms, is most likely 640x480 so take that into account in your design (ie - readable text size/UI elements) but if possible make it resolution independant in case you want to do a PC release later.

Adding in some more info: As the above poster said, Arcade units are exposed to harsher conditions than mose typical PCs. The power may be cut off unexpectedly, the arcade itself may be a smokey environment (which is bad for HDDs) and kids may beat on the machines, so physically the hardware/OS must be able to withstand these things.

A company called Roxor Games publishes titles based on linux PCs, one of the modifications they made was to modify the OS to basically be ready for power-down at any moment, another thing they do is to house their hardware/software in a tamper-resistant case.

Agreed. Your best bet is to develop your title for arcade is to design your software to work on an off-the-shelf PC. A good number of arcade games you see nowadays have standard PC components inside 'em. There are a few companies that have come out with standards for hardware and controls (joystick, light-gun, etc). You might wanna google for 'em.