This is kind of a silly and good question all rolled into 1. Most of us see hitting a 'pause' button as a no no but putting a game into some sort of holding pattern is generally considered acceptable for things like food or rest room breaks or just to get a little rest.
To address Mike and the DKJR MAME WR, he has zero interest in it. When he does go for the record it will be on an arcade machine and certainly wont be using any sort of pause function.
Yeah, before every second/point counted on the timer and just getting a killscreen was cool, I would at times leave Mario at the top of the Pauline ladder and dart to the bathroom and back. But, sacrificed 3,000 or so timer points in the process.
But, no, pause should never count in a real game. Natural hiding spots are fine. I think all rules stem from, could it be done in an arcade BITD or not.