This monitor will do for me and I'm not too worry about the lag. Aren't the monitors on the FCs more than 10 years old? This one should be better in everything unless those sanwa monitors were light years ahead of their time when they came out.
That's just not how it works sadly. Input lag is something you need to focus on as a feature, it's not something you just get because a monitor is 'newer'. That's why there's a whole genre of gaming monitors, and they're often not as nice in the picture quality department (they're fine, but you can do better) because there's always tradeoffs, and they're emphasizing speed.
Plenty of brand new monitors have awful input lag. You can of course choose to not care, but for me putting a monitor that adds any kind of lag into an arcade cabinet utterly defeats the entire point of having a cab. A low lag 720p screen beats a high lag 1080p every day of the week.
Yeah, they look great. The 720p thing is just not an issue, if anything a lot of games look better with it, if you like the slight softening feel. I wouldn't worry about chasing resolution, it's more about it would be great to have replacement screens if you don't have a nice monitor or you've got issues or stuck pixels or whatever else.
Have you had any concrete results to back it up? I saw you were testing some Daimond Vewlixes for lag those have ips monitors same as this LG if I'm not mistaken. What is the difference between those vs an ips monitor of today?.