As I recall, someone here made a 360° steering wheel using a similar technique. They had a steering wheel on a shaft and inserted it in a hole in the front of the cab. The shaft slipped over top of an inverted mouse (a ball mouse IIRC). When the wheel was turned, it would register as left/right movement on the mouse. I suppose an optical would work better for that.
Another way this could be done is by finding a ball mouse, decasing it, and using a larger ball in place of the small one that came with it (pool ball?). It wouldn't be quite as nice as an arcade grade trackball, but it should work pretty well.