hmm.. i think he may be asking about the "i-pac", not the ipod. hence the whole "build your own arcade controls" motif..
anyhow, as i dont have an ipac or something similar, all i can offer is conjecture. have you tried programming it with winipac ipd? since the "volume" buttons on a windows multimedia keyboard do send actual keycodes, then i dont see why the ipac couldnt. however, this is only limited to windows as far as i know so would not be helpful for those running dos/linux setups. another drawback i can think of is in ps/2 mode, the ipac does not support key repeats on all inputs so you may end up tapping the volume button a whole lot instead of being able to hold it down. personally, i am planning on going with an actual volume knob ala oscar's inline hack. i prefer to have a real hardware solution rather than take up 2 coveted inputs for a "soft" solution..