Ok I've been milling over this stuff for over a year now. My ultimate conclusion is that unless you are into pc sims or really like bling on a cab it probably isn't worth it but here is a summary of my findings for those playing the home game:
Probably not practical options:
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Real instrument cluster pulled from car - This obviously is the most realistic choice, but the interfacing to a computer can be cumbersome and this won't fit on an arcade conversion. Also you are stuck with the min/max values as printed on the gauges. Keep in mind that depending upon the cluster you choose, things can get pricey.
Scratch built analog gauges - This is extremely expensive.... a stepper/servo along with an appropriate driver board can be 30 bucks a pop, so you are probably better off hacking up a used car cluster. Most of the same pitfalls of a ready made cluster apply here. The only benefit is you can take the individual gauges and make them to fit your dash in an arcade conversion situation.
Practical options:
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7 segment display - You can get these pre-made online for around 5-10 bucks a pop complete with 8 digits, a row of leds, and some buttons on an Arduino compatible pcb. You can daisy-chain several together and they only take up 2 data lines on your avr. Some programming is required, but libraries are readily available. It's very low overhead on your pc and your avr to drive these. The downside is that the ready made boards are quite tiny (which could also be a plus) and although you can roll your own via buying the individual parts and larger digits, it will cost you more time and more money.
Dot matrix display - These are pretty much exactly like the 7 segment flavors except it's basically a low res monochrome display. 1.25" 8x8 modules can be had for as little as $1.50. Several can be connected together for a seamless, larger, display. They are driven via an avr with the same data lines and low overhead. This flexibility makes it a great for conversions and scratch built cabs alike. In addition you can display whatever you want.... a needle, numbers.... animations ect. The only real downside is the low resolution.
LCD/LED monitor - Yeah so just use a second monitor and display the graphics to fake whatever gauges you want. This method certainly has the most flexibility, but rgb/vga monitors in the needed size can be quite costly, you will probably need two (one for tacho and one for speedo) so that displays can fit around the wheel, some games/emulators kill the secondary monitors when going to fullscreen, and even with dedicated video cards driving multiple displays can add significant overhead to your pc. It's certainly an option if money is no object, but otherwise it's probably too expensive.