Admittedly I have envisioned such device since long, although creating it is completely beyond my knowledge and skills.
The USB port would probably be a limitation. I had imagined something more like a pci-express board.
One possible design would simply mirror the gpu framebuffer ram and implement the logic to perform DAC based on user defined timings, totally bypassing the OS. The hardware implementation would implement a CRTC. Switching video modes would be as simple as sending the new CRTC values (modeline) to the device, taking effect instantly, without the insane overhead that mode switching involves on modern operating systems.
Another more ambitious design would involve the emulation of the whole CRTC itself, and just implement one DAC for each line (R, G, B, H, V). This would work without any video card on the system. The hardware implementation would be more simple, but the RGB-HV signal would need to be created by software on real time. I think the CPU requirements would make this approach impossible. This design would virtually allow to recreate any video signal that ever existed. An emulator supporting this wouldn't even require to do any v-sync.
The paradox is the hardware to do this is already invented inside any cheap video card available, it's just a software issue.