Whoa, what have I done?

I think I was one of the people to get this whole "LED in every button" thing started, but I've pretty much abandoned the idea as being un-arcadelike. I still plan to have LEDs in the start buttons though. (Sure wish I could find some Atari start buttons to hack!)
Anyway, one of the things I was considering is exactly what you're talking about. I quickly discarded the notion of lighting the buttons to be used for basically one reason--you first need to create a database of button maps for every friggin game!!! Also, for my panel, it meant wiring up a LOT of individial wires for the LEDs, and having to interface that.
My new plan is to just use Raging Dragon with something like the BFD skin, and actually make a graphic representing the control setup, that will become a part of each screenshot. That way, when you select a game in RD, you see not only the marquee and screen for the game, but the joystick and button layout needed for the game. Of course, this all goes away once you start the game, but it will work better for me since I am using a rotating control panel, and so may be using an entirely different set of controls (yokes, guns, trackballs, trigger sticks) from one game to the next.
But if the LED thing works, it would be great. Keep us posted as to how it goes!