Actually, there IS Knightmare "arcade" - which in that case it was an MSX disguised as an arcade (made by Ademir...!) running the game on coins 
So there were some Knightmare arcade - at least here in Brazil after all 
Hmmm, in that case he must have patched the game in order to show the message 'insert coins' and to use another key (not space) to start/continue the game. Where is this 'arcade' version? It should be funny to see 'insert coins' in the main screen.
Not sure about how the Brazilian version was made, but similar "arcade MSX" made in Korea worked as time based machine. Program code was not altered (Korean MSX PCB actually uses standard MSX carts as well). When you applied coins, you bought time, which was displayed by some other means. When the time got up, the game just resetted.