Given that their arcade hardwares to date have been generally mediocre spec...
Up until Model 3 their arcade hardware was state of the art. Even Naomi wasn't really mediocre by the time it came out even if it was replicated at home.
The lion's share of any revenue an arcade game generates comes from the home versions on console. So why bother creating a bespoke hardware completely incompatible with home hardware?
Let's look at a list of the arcade games they made the last couple of years (from Wikipedia):
Chihiro Satellite Terminal games
Sega Network Mahjohng MJ2 — (2003)
Quest Of D — (2004)
Sega Golf Club Network Pro Tour — (2004)
Quest Of D Ver. 1.10 — (2004)
Quest Of D Ver. 1.20 — (2004)
Sangokushi Taisen — (2005)
Sega Golf Club Network Pro Tour Version 2005 — (2005)
Sega Network Mahjohng MJ3 — (2005)
Quest Of D Ver. 2.0 — (2005)
Mobile Suit Gundam 0079 - Card Builder — (2005)
Sega Golf Club Network Pro Tour Version 2006 - Next Tours — (2006)
Mobile Suit Gundam 0079 - Card Builder (Ver. 2.00) — (2006)
Sangokushi Taisen 2 — (2006)
Mobile Suit Gundam 0079 - Card Builder (Ver. 2.01) — (2006)
Sega Network Mahjohng MJ3 Evolution — (2006)
Mobile Suit Gundam 0079 - Card Builder (Ver. 2.02) — (2006)
Quest of D Ver.3.0 — (2006)
Quest of D Ver.3.01 — (2006)
Sega Lindbergh games
Released
The House of the Dead 4 — (2005)
After Burner Climax — (2006)
Initial D Arcade Stage 4 — (2006)
The House of the Dead 4 Special — (2006)
Virtua Fighter 5 — (2006)
Power Smash 3: Sega Professional Tennis — (2006)
Let's Go Jungle!: Lost on the Island of Spice — (2006)
Ghost Squad Evolution — (2007)
Initial D Arcade Stage 4 Limited — (2007)
Let's Go Jungle! Special: Lost on the Island of Spice — (2007)
OutRun 2 SP SDX — (2007)
Sega Network Casino Club — (2007)
Virtua Fighter 5 Ver.B — (2007)
Virtua Fighter 5 Ver.C — (2007)
Sega Network Casino Club 2 — (2008)
Primeval Hunt — (2008)
Virtua Fighter 5 Ver.D — (2008)
Sega Race TV — (2008)
Initial D Arcade Stage 4 Break — (2008)
Virtua Fighter 5R — (2008)
RAMBO — (2008)
The House of The Dead EX — (2008)
R-Tuned - Ultimate Street Racing — (2008)
Touch Striker — (2009)
Harley Davidson - King of the Road — (2009)
Hummer — (2009)
Initial D Arcade Stage 5 — (2009)
Lindbergh Red games
Released
2 SPICY — (2007)
Lindbergh Blue games
Released
Derby Owners Club 2008 — (2007)
Mahjong MJ4 — (2008)
Quest of D VS — (2008)
Sega Europa-R games
Sega Rally 3 — (2008)
Ringedge games
Border Break — (2009)
Shining Force Cross — (2009)
The number of those games that had a home console release is tiny.
I don't think that a Model 4 with raytracing makes financial sense either but at least let's get our facts together.