"I'd like to know the reason why it can't be in any reasonable amount of time."
Same reason people people can't mod Unreal Tournament 3 to be exactly like Halo 2. There are a lot of little things, and missing even a relatively small detail can fuck up a lot of things. Like take the whole gravity thing, you know... a characters falling speed? Mess that up even a little bit, and characters like Ky might become even more difficult to combo. Or easier. Either way, not arcade perfect. Think about the PS2 port for Marvel vs Capcom 2; in my mind it isn't that bad... but I don't really play the game much. Diehards though rip it apart... so while you can probably get it to feel close... perfect is a lofty goal I severely doubt you can do.
"Also, people make emulators, translate manga, anime, and games, create software, characters and code all for free already, why would ripping code from game A to game B be any different?"
People do that for free because they choose to do that, usually not at someones request. And I doubt that you can just burn the code from a PS2 disc and just throw it into mugen. The information might be available, but it would still be a ton of hand done shit.
Just remember that the guys doing ggpo support there own projects, with FBA and their server and their site and all that. Plus they got bigger goals in mind if they wanna go the console games route by getting real commercial backing, not some thank yous on a message board.
"I haven't been keeping up on the project, but last I checked (like two/three months ago), the dev. was no where near completion. Even if the project was near completion, my idea would still use less resources due to not needing emulation."
Emulation takes a lot of time. Hell, they are still working on XBLA Perfect Dark (cries) which isn't even a complex game by todays standards, and thats being done by professionals. If they develop some hotness in the way of emulation for GG, i'm all for it... but I am patient about it and I'll wait as long as it takes.
I don't have the time to drive everywhere to lose in GG, and I like netplay in things. That said, I would be very sceptical about a arcade-perfect mugen setup for gg..... as would most people. I'm sure you aren't the first to think about it, but suggesting something and doing something about it are two different things. But it sounds like you don't know much about the process involved, so why not research the concept yourself a bit as a reality, and see if you can find the walls development would hit.