PlasmoidThunder give the answer I needed an he said it's a known issue with 1.1. The way around it is to increase the fade transition between screens, but that ends up looking really odd. It's not just Arcade Mode where it occurs either, as any menu transition will cut sound effects off.
Okay then in that case for future project I just have to make very short sound FX.wav for the system.snd for mugen 1.1 for now on