Wow, 19 bucks eh ?? Wish I lived closer to where all this action is ...

Anyway, I haven't ever had my hands on the inside of one of those myself, but I just finished a successfull rebuild of a "Spy Hunter" I picked up (for free). And the project before that was "Pole Position" (also free). I had to go thru the controls on both of those.
Due to the age of Monaco, I doubt it's optical wheel or pedal, more than likely it's a potentiometers on those controls. It's also pretty likely they are in rough shape, first things to try is a shot of contact or tuner cleaner in the pots (available at Rad-Shack), spray it around the shaft if there isn't any openings in the pots and work the shafts back and forth.
If that doesn't fix it, and you have an ohmmeter, monitor the resistance of the pots as you turn the shafts. the resistance change should be smooth and steady as you work the pots, if not, you'll have to replace them.
If the resistance checks ok, then the problem is on one of the boards or a connection problem. I seem to think that it was a logic gate game (no central processor), and there were multiple boards and a whole mess of wiring, so it's unlikely there's any "test" mode you can put the machine into and check the control feedback, but there might be, you'd have to look.
You'll want to check and clean all of the connections anyway since problems there are common on all older games.
Good luck with it, hope you get it working right and let me know how you make out!
D