The reason I went with Shogun Assassin is because that is the version with the cult following in the states. While, yes, the orginal films play better as a whole and not cut up, they have been little seen here in the states. Plus, it is the version that is shown at the end of KB2.
As for John Water's films, if not Pink Flamingos, then how about Polyester? Mainstream enough but still using Waters typical collection of misfits. Would be especially good if the guys could secure some scratch and sniff cards for the viewing. My guess is that the only Waters film the guys have seen is Hairspray, but that really gives you no idea of what the man's oeuvre is like. A cult movie marathon without a Waters film would seem incomplete.
Also, I know it largely comes down to personal taste, but I'm not sure if Tetsuo would spawn a more interesting discussion than Ichi. While Tetsuo definitely has some very memorable imagery, It also gets very repetitive very quickly. It also seems to me that for modern cult movies, no fan base is really as secure as the T. Mike group. And since Ichi is the best known of his films, that's why I included it.
Finally, I gotta say that I agree with the inclusion of a Lindsay Anderson film. I wonder if watching If... would make them re-do their high school film lists.
P.S. Another suggestion: Peter Brook's adaptation of Marat/Sade. Or possibly a Roeg film, like Performance or Walkabout.