PS2 games were DVD based. So, games can be up to 9 Gb by definition. Now, that doesn't mean that any game was ever that large, but they could have been. For XBox, most games are closer to 1-4 Gb if that helps as a reference (never messed with PS2 stuff, so I can't help with that).
If you have a pair of U360's, you have a pair of analog sticks. If you have enough buttons, you could use some as the D-pad.
IMO though, if you are going to emulate console games, you should really use a controller that's at least similar to the system they were originally written for. I opted for a pair of Logitech Rumblepads which are very similar to a PS2 controller. I think they work fine for all of the emulators I have installed.