[Gemma]

The 'Default User Settings' function will only work for newly registered members, it won't work for members who are already registered.

Are the arcade settings set to accept notification by email in the UserCP?

I've not had any problems with email notifications for beaten scores, tournaments or challenges and cannot reproduce any error of non-delivered email notifications.

edit: YOu would need to get the users to updated their settings manually, or if you want everyone to be notified by email (or PM) you could probably do a database query.