The Sega NAOMI arcade system comes in 3 forms.  There's the basic NAOMI hardware, then we have that hardware with a GD-ROM drive attachment and finally there's the NAOMI 2 which looks pretty much the same as the first system but in black.  The NAOMI 2 is fully backwards compatible with all NAOMI games as well as NAOMI 2 games. So it probably better to pick up one of those although they do cost a lot more.

Like many arcade systems, it's perfectly possible for you to get a NAOMI running in your very own home without the need for an arcade cabinet. There are 3 main bits of kit that you'll need.

1. NAOMI Hardware (obviously)

2. Sega or Capcom I/O Board with harness (wires and connectors)

3. Power Supply Unit

That's all you need unless you'll be running the system though a monitor or TV with no audio input.  In that case you'll also need an audio amplifier since the NAOMI outputs none amplified sound.  Take a look below at my setup.
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As you can see above, it's quite a large set up.  Many people build their systems on to a wooden or strong plastic base to make a "home console" Naomi system.  Some have even modded PC cases for the unit.  While it may be bulky to do this it sure saves time on having to set everything up every time you want to use the system.
At first it looks quite daunting having to set up the NAOMI but in reality it's quite simple.

To get the image on to a screen you'll need a VGA (15 pin RGB) compatible TV or just use a PC Monitor.  The NAOMI can output 15KHz and 31KHz signals so even a modern PC screen or HD TV will work with it. Just make sure to set all the dip switches on the back of the NAOMI to off.  This will boot the system in 31KHz mode.

Audio comes from two standard phono ports.  Just simply connect them to your display or amplifier.

The USB port sadly isn't for USB joysticks but a connection port for the I/O Board.  You can use a standard male to female USB cable.  The sort of cable that normally comes with printers.

Below you can see one of the many types of I/O Boards compatible with NAOMI.  Mine is the 837-13844-02 [JVS I/O Control Board Type 2].  It's actually quite an unusual model which was used in multi screen and network cabinets such as F355 Challenge and Ghost Squad.  It features 3 ports for controls.  2 of which are for standard analogue and digital inputs.  The other is used for various other controls.

While this board has many plus points over the standard 837-13551-92 [JVS I/O Control Board Type 1], it is impossible to have more than 4 buttons per player, or at least I can't find them.  This isn't really a problem though if you are only planning to use this board with the NAOMI since no NAOMI game uses 6 buttons.  The top right port is for analogue controls while the top left is for digital.

There are many options for connecting a controller to an I/O board but by far the most common and probably easiest to mod is the Neo Geo controller. I modded a model 2 Neo Geo joystick for use with my NAOMI.  Works like a dream. Modding the Neo Geo stick is very simple.  All you need to do is match up the wires from the stick to the inputs on the I/O Board.  Do remember though that different I/O boards use different pin layouts.  I had to experiment with my board in order to find all 4 controller buttons.  The directions were the same pin numbers as the 837-13551-92 I/O Board which is well documented on the net.

Finally, you'll need a Power Supply Unit or PSU as they're more commonly known.  Below you can see the exact rating you'll need.  Some say you can just buy a PC PSU then mod it.  I'd say you'd be much better off paying a little extra for the correct voltage and connection ports.  The Below PSU is made with arcade use in mind.  Do remember to buy a PSU with the correct input voltage.  This one is designed for use in Japan but would probably work well in any country that uses AC 100 to 120 volts.