Is there any reason a standard household (on/off) switch would not work if connected to a keyboard encode for a gear shifter for a game like Pole Position in Mame? It just has the two position high/low joystick switch in Mame, so I can not see why it would not work.
Yes, Pole Position used a shifter with a single microswitch so a simple light switch would work assuming you use MAME v0.151 or newer
or one of the dedicated builds that disable MAME's default toggle behavior for the gear change input.
As of MAME v.151, the shifter toggle can be disabled in the game's individual cfg file!
More info here:http://forum.arcadecontrols.com/index.php/topic,135345.msg1397466.html#msg1397466
To work with games that had shifters with two microswitches, you could use a 3-way switch like S1 in this diagram.
- Connect your daisy-chained ground to the Common screw. (lower right)
- Connect one encoder input to the red Traveller wire screw. (upper left)
- Connect the other encoder input to the black Traveller wire screw. (upper right)

Also, what about a dimmer switch connected to an analog encode for use as a paddle for games like Pong?
Theoretically, you could add a resistor to change the dimmer switch variable resistor (Atari paddle) into a half-range potentiometer, but the dimmer is
very likely to have problems with jitter so it's probably not worth the effort.

IMHO it's better to use a high-quality, long-life potentiometer for this.
Scott