First off, the hundred or so on an encoder is way too much. Check out the prices on I-Pacs or Keywiz's. You'll find that the price is probably more consistent with getting a 4 USB game pads, at least ones with a lot of buttons.
Second of all, it is a lot of work to hack all the controllers. I used an IPAC and not only did I have the thing wired up in an evening, but the customer support is phenomenal. You can just about expect to get a response from Andy within 1/2 hour! Trust me, there is plenty of work in designing, building, decorating and outfitting a CAB. Saving a few bucks on an encoder is not (IMHO) a good investment!
Having said that, I have a Dual Strike sindewinder, a Sidewinder Wheel, a trackball, a spinner and a Sidewinder joystick plugged into a 7 port USB2 hub. They all get along just fine! Your experienc may vary, but mine work fine in Mame.