Sounds like an interesting project, WindDrake.   

Disclaimer: Kevin and Jon are the XBox/KADE experts -- the following is just me thinking out loud.   
 
   
Depending on the needed number of inputs, three atMega32u4 (KADESTICK) or at90usb646/at90usb1286 (maxArcade) AVRs, one per player.
Jon or Kevin *might* be able to merge/reconfigure/recompile source code from these three KADE firmwares:
  * Xbox Gamepad Encoder (Custom) -- XBox specific functions
  * KADESTICK 
or KADE maxArcade - USB/HID Joystick 2 Player with Analog (Beta) -- analog input for the gas pedal
  * Trackball/Spinner (Quadrature) to USBHID Gamepad Encoder (Beta) -- quadrature inputs for the 360 optical wheel
May want to use X-axis for the optical inputs and change the analog axis to X-ro (rotation) axis for the gas pedal 
or Y-axis for the optical (use wheel to scroll through FE menu?) and X-axis for the pedal -- not sure which would be better.   

Not sure if the emulator programs on XBox will differentiate between P1/P2/P3 on the optical and analog controls 
or if P2 should be Y-axis optical and Y-ro axis for the gas pedal and P3 should be on the Z-axes.
Also not sure if the gas pedals or unused analog axes can cause problems with the front end scrolling -- the KADESTICK 4-axis firmware caused constant scrolling in MAMEUIFX when the Z-axis (a.k.a. mouse scroll wheel) was disconnected. (0v = full down  

)
A simple voltage divider with matching resistors will keep any unused analog axes centered -- any resistors between 2.4k and 51k are definitely fine as long as they are the same resistance.
    5v --- resistor ---|--- resistor --- ground
                            input
Are there any other buttons/functions you would need beyond the steering wheels, gas pedals, Start, Back, and Exit buttons?
Scott