What allows the PC based arcade hardware to be safely powered off in an instant is the "Enhanced Write Filter". The enhanced write filter or EWF for short, either prevents or redirects writes to a volume. In the

X2's case it redirects writes to RAM so after every reboot you're booting a clean image.
Technically you should be able to install EWF in regular Windows XP/7 but honestly I've never tried it.
For optimum compatibility with my tools, I recommend staying with Windows XP for the operating system. There where alot of security changes between Windows releases that greatly increased process security and can cause problems when trying to do certain things.
As far as I/O goes, the most authentic solution would be to get one of the JVS I/O cards that are inside of the

X2s. They are simple boards that mount to the expansion slot on the back of a PC case, and plug into a serial header on the motherbaord. This card has the role of taking node0 in your I/O chain which some games query for dipswitch settings. Another possible solution instead of the I/O card, is to get a RS485 -> RS232 adapter and connect your JVS I/O directly to the PC, but some games might have problems with this. In either solution the I/O board needs to be connected to COM2. You can usually change serial port numbers inside of Windows.
The typex/x2 loaders you sometimes find prepacked with games are usually just tools designed to give you an interface for configuring controls and then injecting a keyboard to JVS dll. If you dont have an "authentic" JVS setup, then you will need to use these launchers when starting the game. Honestly, this is probably your best bet, JVS is annoying and slow. A properly written keyboard/direct input to JVS interpreter can poll for input a bit faster.