The last time that I spoke to John a couple of months back, he was planning on a new version of v3arcade.. Though a pro version has supposedly been in the pipeline since the first release, so I don't know where that stands. As for the suggestion of removing it from vbulletin.org or moving it to an "inactive hacks" forum, I simply laugh at those who suggested it..
v3arcade
is a supported mod, perhaps not by the author but there are coders out there that continue to release addons and fixes for it. With any Arcade system, unless done in full cooperation with game authors (such as pnflashgames.com) there is going to be issues with copyright laws and such. I even offered to start up such a site some time ago, but nobody was interested and it never went ahead - and I don't have the time to spare anymore.
I'm sure people want something for nothing these days.. There are nearly 1,000 games available and people still want more? Just how much bandwidth do you want to eat up?