I agree that for a dedicate Emulator processor it's probably better to drop straight into the front end. But that's should be fairly trivial.
Hare my thoughts on running MAME/MESS on Raspberry Pi. Some of these challenges may have been resolved by those with Alpha & Beta boards.
Connecting an HDTV via HDMI is certainly going to be the easiest option along with VGA or DVI monitors via an HDMI adapter. Composite TV might be usable and appropriate for console emulators and some horizontal arcade games. Arcade monitors are probably not possible unless they have a VGA input.
USB keyboard and mouse will certainly be supported along with arcade controls connected via a hacked keyboard, mouse or commercial encoder (e.g. Ultimarc). Support for USB controllers should be possible although it may be necessary to include additional drivers. I'm hopeful it will be possible to use a PS3 controller (via USB).
From what I can determine, it should be possible to compile MAME (and MESS) for the Raspberry Pi. Other emulators will depend on whether they support non-x86 Linux and what kind of library / OS support they need. MAME & MESS will require SDL for graphics and sound – I don't know whether this exists already or will need to be created.
The last piece of software is the front end / launcher. However I don't know what's out there for non-x86 Linux (w/SDL). I would prefer something minimalist, but I know many want a front end with a lot more functionality. The choice of front end will also depend on whether a hi-res (e.g. HDMI) or low-res (e.g. composite) display is used.
The final challenge is getting everything on to the SD card. I'm sure that eventually there will be pre-built images and tools, but to start everyone is probably going to have to do everything themselves.