How much electronics experience do you have? A guitar hero type controller could be made pretty easily using a cheap microcontroller which has either USB support or coupled with the FT245R which is a chip that gives gives you an easily programmable FIFO interface over USB (so you have two FIFO buffers, one for input, one for output and you can read and write the buffers over USB). They supply a royalty free driver so you don't need to mess around with writing drivers. Though if you want your homebrew controller to work as a game controller (rather than just working with your game) you'd need to write a driver. Of course electronics are only part of what needs to be done, you'd need to produce a casing and buttons.

Quote:Last, there are various microcontrollers with USB built-in, where the manufacturers have kits with a microcontroller EEPROM programmer, sample code, sample controllers, and often even an I/O board for the controller in question. Expect to pay ~$500.

While a full set of professional dev tools, programmer, debugger, printed manuals etc can easily cost $500 or over, you can use something like a PIC with a simple homebrew programmer and freely available tools. There are also cheap unofficial programmers/debuggers which will do the job nicely. So you can do things with microcontrollers and spend well under $500.