I'm no programmer, so this is just my guess.
What the MAME team are aiming for is correct emulation rather than speed. You wont see either KI playable on MAME. But MK is definitly playable (from what I have heard), although not perfect. What U64 has done is probably some optimization of the drivers for KI. If anyone would make an emulator for JUST MK and optimize it very much, you would probably see it playable at full speed at an xbox.
Note. I am not an expert at emulation. I am not a programmer etc etc... (disclaimer =))... don't take my word for this.
EDIT: Typos... as usual. Have to learn how to spell =)