I'm making my 3rd controller now, that is the cheapest way.
Here is a run down of what i have used so far (I'm bored, so it will be a longer post and the paragraphs will have too many sentences and might be orphans).
The typical playstation controller runs at 3.3v (3.45) with a current too low to use. However, in some of (maybe all?) the dual shock controllers you have a 9v you can utilize.
The buttons
Mine I believe are Larenzo buttons, which are now not possible to get unless you get them second hand. The buttons from coinop express use a different/older lamp mount. To get them out you have to pull and twist at the same time. Lorenzo's have a better stem coming off the button, but have a spacer in the dome/lens compartment that can get in the way (file it off if it does). HAPP buttons are the last ones you want to get. I have to get the red ones from HAPP, and they need more work than the rest. With all the buttons, you have to put 1/4 table liners in the button chamber to muffle sound and give a better bouncy/firm feeling to the buttons. These liners can be found at walmart.
Switches/diodes
Cherry switches have less travel. Which makes them better (especially when foam stuff in buttons) for button pushing. With or without the Cherries you should still use a piece of string to fasten the switch/lamp tighter to the stem. I wrap a a piece of string under the locking nut for the stem then around the switch, then back around the stem for a tight hold. Diodes should be rated for 2A (Not the popular 1A rating you will find on many pop'n ASC sites, unless this is the only thing you'll use them for).
Lights
LED's are the cheapest way here, also incandescent bulbs most likely won't light fast enough for your button presses. If you use a ps2 controller with dual shock, you can get a total of about 13 volts with about 200ma current. So, you could techinally skip using a 2nd power supply and light the leds (Wiring them in parallel) off the controller, but I'm not sure if the mcd of the led's will be high enough for some. You could also use the 9v in dual shock controllers to power relays. Otherwise, a 2nd ps of 12v with about 650ma will do. Whatever you do buy the led's yourself and make sure they are the "Super Bright" kind. I use 3 LED's per button and the total cost of those was about 12usd.
Wood.
USE THE LIGHTEST WOOD YOU CAN AFFORD! The first controller I made, I used MDF. OOOPS!!! This stuff is messy, gumy on hole saws, and horrible to fasten screws to (Glues together great though!). Something I have learned is to use all 1/4 wood. Using 2 planes where I feel 1/2 is needed or has to be used. If you use 2 1/4 planes, you can trim back one of the 1/4 planes, a 1/4 of a inch, and have joints that are just 1/4. Makes a better looking seal, especially if you stain the wood like I do.
Wiring
All 22 or 24 awg wire. If you don't want to buy Cube Relays or SSR's, then the common ground will be the ps2. Wire all grounds to where you think they should go from the 12v from the 2nd ps, and make sure those grounds tie into the ps2's ground (I guess, I use 12v/10a relays to keep the power sources seperate). When in doubt, put diodes everywhere.
Misc.
Also I use L-Braces on the corner joints of the box andsmall spst switches for select/start. Quick connects for wires and hot glue for the controller and other stuff.
Right now, on my 3rd box, I have found of course faster and cheaper ways to make the controller. You could make this controller yourself for about 175-200 with lights.
P.S. If anyone knows where to get different color lenses for the buttons or the wedge based lamp holder (orange/clear thing that holds leds/bulbs) please let me know. I have about 30 extra buttons (white, yellow, and green) but I am missing 3 blues and 2 reds to make 2 more controllers. | 
