BildaCat, I wish I was next door becouse I think that your problem could be easily found and fixed in a couple of hours (wiring problem). From the Pictures, I see you have an I-Pac, 2 Joysticks w/ 7 Buttons.
Here are a couple of suggestions...
1. Borrow a Multimeter and check all your wiring, buttons, joysticks, switches, cards, etc., but from the pictues I'd say the wiring is the problem (ground mostly).
2. Check that Power(?) switch. It looks like it's grounded to the harness from the I-Pac and then daisy chained elsewhereor back to the I-Pac probably. I wouldn't daisy chain a ground from there. Leave the ground to your harness , but cut and remove the rest of it.
Here's what I would do... disconnect the ground wire from the I-Pac and anywhere else it is connected. If there are any buttons or joysticks with 2 wires still attached to the microswitches then remove the one that's acting as the ground. You should have no grounds anywhere pass your harness ie. between your buttons, joysticks and I-Pac.
Go to your local electronics store and get some black wire, connectors and a crimper (I think it's 22 guage and .128 (red) connectors) $10 - $15. Now run from Player 1 Ground (Don't connect yet) to a button, leave a little slack and cut the wire. Strip off 1/4" on both ends where you just cut, then twist the two wires together and slide on the connector then crimp (there should be a thread here somewhere about crimping). Then continue the process for the other 6 buttons and the joystick. Connect this wire to the I-Pac , buttons and joystick for Player 1. Repeat the process for player 2 and make a new ground.
Try that and see if it works and it should. Any buttons or joysticks that don't work can be traced from the button to the I-Pac and it should be nothing more than fixing the wire or making a new one.
Remember you have the pictures as a reference if you need it. Try to fix it yourself, you'll feel great if you do and if you don't then no harm done
Good Luck...