The problem is picking stuff that isn't already on the NES. My first instinct in these threads is always to go with "Circus Charlie" -- I loved that arcade game and I think the 7800's bright colors and good palette would add quite a bit to that game, but the NES version is quite adequate in its own right and does a good job of using the fun of the original arcade game. The same applies for "Mappy" -- you instantly think it would be a great idea, but then realize that the NES version is quite good in its own right. That really narrows down the list quite a bit for games that would be unique yet a great amount of fun!
Pandora's Palace would be an amazing offering on the 7800. A fun, great little arcade game with cool music and an awesome theme yet isn't available on the NES! Excellent choice.

Arabian doesn't seem to have enough to offer for a fully-fleshed out game; it seems a coder would have to add more than the few levels before 'GAME OVER' if that youtube video is to be trusted for a complete game playthrough. I've never played it so I'm not sure, but it seemed to only have 4 screens then game over!
Here are some arcade game ideas to toss around and see what people think:
Pac & Pal - exclusive to Japan, but nonetheless a pretty good game, although Super Pac is quite awesome and very similar.
Moon Cresta - only made on SNES, could be a good choice to show what the earlier iterations could do! Plus it's a pretty good little shooter.
Satan's Hollow - This one could really show the 7800s graphics capability and would really show off the music of the console quite well!
Bubbles - A quirky little Williams title but is an absolute blast to play! Would add a bit of fun and replayability to the 7800!
Bosconian or Time Pilot - both could be great choices, good updates!
Hunchback - a great little game that's like Pandora's Palace! Good sound IIRC.
Bomb Jack - This port was absolutely amazing on the A8, I think the 7800 could do it quite well as well!
Peter Pepper's Ice Cream Factory - this is an original title that would make a unique little port to the 7800, as it's not seen elsewhere!
Realistically any of Atari's arcade offerings from the time period would be good, as well, though I know people don't like arcade ports to be homebrews as frequently. I think a 7800 imagining of Indy: Temple of Doom would be cool, as with others like Xybots, Roadblasters, etc. -- although the Lynx does these well, the 7800 could 'flesh out' these experiences and really it's a great opportunity to showcase the "might have been" had Atari really pushed the console.
I think the difficulty here, however, is in avoiding turning the 7800 into what the ColecoVision offered in the earlier generation -- a console that plays mostly arcade ports of quirky, different games that weren't mainstream. Although I love the ColecoVision for what it did with those games, since the 7800 came from the powerhouse of the industry pre-NES, it just doesn't seem to do it justice to relegate it to arcade ports of obscure games ala CV.
Of course I always enjoy original homebrews and would love seeing those more!
EDIT: Make Trax is an awesome idea. I love that game and think it would be done very well on the 7800!