but I think the PC engine version looks even better than the arcade...
The PCE version was supposed to be an enhanced conversion, similar to Hot B's another game Insector X, where the arcade version featured cute deformed characters, while the Mega Drive port had realistic mecha bugs, though this port was considered horrible by many, and not as good as the Famicom version. Another game I have in mind that enhanced the arcade version a lot was the Mega Drive version of Chelnov/Atomic Runner.
I think most of the graphics in the PCE version of Chuunka Taisen look better, at least more consistent in style. IMO the dragon boss in the arcade version looks really bad and out of place, and surprisingly even the Famicom and SMS versions of it look better. I couldn't make up my mind on the animated backgrounds in the boss sections of the PCE version, though, as they now look much more dynamic, but become repetitive and lose some of the charms of the original backgrounds.
(Because of these clouds, I once thought this game shared some staff with Coryoon and PC Denjin, but it doesn't seem to be correct.)