I remember going into most of the arcades in Blackpool around 1992/1993 and it just being Street Fighter/Virtua Fighter/Tekken/Mortal Kombat in almost every cab. Very few shooters, certainly no classics by that time.
I saw a number of machines just completely b***erdised - I own 9 Electrocoin Goliath's, most, came with 2 player 6-button hack-ins and i've had to really scrape around to find single player panels for the games I want to have.
One of my dedicated's had been hacked to 2 player and has had to be very carefully welded, sanded, sprayed, CPO'd etc.
A friend described being in an arcade and the don't-give-a-toss-if-its-broken-we've-got-your-money cashier came to empty an SF2 machine and about £1k was in it - his comment "we've got to get more of these in here".
It was around this time that op's just stopped caring that joysticks weren't working, buttons were stuck etc, a number of arcades (not all) had shrivelled into the sess-pits they were advertised as with graffiti on cabs, knackered controls, half-dead monitors with a colour missing, ash-trays brimming over and some gnarly change booth person sat at the back doling out change for the cycle of emptying the cash-boxes.
I've seen some fights start over nothing because the of testosterone brewing playing the one-on-one fighting games.
Its easy to say that SF2 killed the arcades - it didn't, me and stevearcade have had that argument out already in the past (and I respect his thoughts even though we disagree) and I don't think it did specifically kill it but it was just a part of a circular decline and its easy to recognise it as part of a turning point.
A lot of UK arcades died because the people that played in them in the 80's heyday simply got older and started doing more boring grown up sensible stuff like jobs, drinking, girlfriends and kids.
I'll join your loathing of cocktail cabs though; its not a gaming position looking down directly on the machine for a game that's supposed to be in front of you, sunlight glaring off the glass, controls at angles your hands were never meant to play games in. Cocktail cabs were an invention for the bar scene IMHO, somewhere to put your beer on. Most guys I talk to these days, when I mention the arcade machines, the only thing they say is "yeah, I remember those table ones that had space invaders in the pub" - maybe uprights were seen as a kids thing and cocktail tables with beer spilt on them and an overbrimming smelly ashtray and half of the last occupants pie and peas were seen as more grown up.
Just some random meanderings on the subject...