What version of OS X? "sdlvideo_init: initialization failed!" is currently a known incompatibility with 10.7 Lion in full-screen mode. You can play in windowed mode while we wait for the SDL guys to cough up a fix.
It seems this hasn't been fixed yet, right?, tried with last full release (0.145)
I upgraded to lion a couple of weeks ago and was still using a mame binary compiled under snow leopard, and with this binary I don't get this error when I execute it in lion. So it doesn't seem to be lion or the source code by themselves, but how it's compiled under lion. Am I right about this?, is it a problem with the newest Xcode?