Generally speaking, ACA emulates the game's PCB - nothing more, nothing less. So if it's in the Game Settings menu, it's almost certainly straight from the game board.
Here's Gradius III's operator manual - seems it suggests Normal as its default, with Easy/Hard/V.Hard as the other three options.
MAME's another good way to see a game's DIPs. I've been playing a lot of SNK's 80s arcade catalogue, the last year or so - I notice that the operator manuals, MAME, and ACA all seem to agree that Ikari, Dogosoken and Guevara's boards default to Easy (which is not at all easy

). Tecmo boards seem similar... interestingly, what ACA calls "Easy/Normal/Hard/V.Hard" in Ninja Gaiden is labeled "Normal/Special1/Special2/Special3" in the game's English operator manual.
There's also special cases like Double Dragon II, whose factory defaults are Normal difficulty/Normal timer/No spin-kick assist. The operator's manual recommends Hard difficulty/Hard timer/Easy spin-kick... I suspect so 80s kids would die extra-quick while spamming the RADICOOL super attack (which the AI will punish viciously, if not properly set up with good fundamentals

). So it's not an exact science.
NB that a few ACA releases have optional bugfixes (Image Fight), or sync settings (Super Cobra's PCB refresh rate is very slightly above 60hz), or just special additions from the staff (Trigon's hitbox reduction) - if present, these are always found under the "Preference Settings" submenu.