I really want to answer this because i love both these machines!

Psy wrote :- I was wondering which system had the more powerful video chip the Neo-Geo or the Amiga, I heard the Amiga does its scaling and rotation in software instead of in hardware like the Neo-Geo if this is true was Commodore planning on giving the Amiga hardware scaling and rotation?
I have read both the Amiga and Neo Geo hardware manuals so i know quite a lot about this. To start with the Neo Geo has sprite scaling but it *can't* rotate sprites. Games which have rotating sprites - either store all possible rotations or have an additional chip in the cartridge. + I cant actually think of any games that have proper rotating sprites offhand.
The answer is that the Neo Geo has a vastly more powerful video chip for games (huge number of hardware sprites, and multiple playfields) but if you are talking about computer tasks - e.g. drawing/artwork/3D rendering then the Amiga has a more powerful videochip with many screen modes and much higher resolution than the Neo Geo. The Neo Geo doesnt have a blitter so if you arent talking about sprites then it would probably be slower plotting to the screen with a Neo Geo.
Cantido wrote :- Metal Slug n does look nice,... bit it slows down a lot once there are a few sprites on the screen (on real hardware).
That is just bad programming, not a problem with the hardware. The Neo Geo can display a huge number of sprites onscreen with no processor overhead. The only overhead comes from handling them. Metal Slug 3 for example has no slowdown and more on screen than Metal Slug 1.
This is the latest Neo Geo release Fast Striker (2010) and it can display a huge number of objects on screen
http://www.youtube.com/watch?v=-_tnqgKFnto.
It's worth noting the pseudo 3D backgrounds in this game whilst very impressive are done by animating + looping sections of the background - not by any real 3D ability. looks great though
The A500 was released at around 100 dollars less than the AES. Which is the more (generally speaking) capable machine?
not a fair comparison, do you know how much Neo Geo games cost at the time? £150-199 for one game! The Neo Geo has very little onboard memory which was expensive in those days. The Neo Geo was the same hardware as what you would have found in arcades so it was much more capable for games, and you would expect so at that price.
The Amiga CD32 was an appalling games console at the time, I was really disappointed, it couldnt even really compete with the SNES from a technical point of view ( a console released a couple of years earlier) I'm not sure what Commodore were thinking. Putting a computer into a console never works. It is great now though for playing all the old Amiga games on CD (yes i have a CD32 lol)