Gates will be cheaper. I paid 50 cents(canadian) per IC, and used 2. Plus 1$ worth of led's, and some resistors I already had. Total cost to me, under 3$. It took me about 2 hours to get the pcb prepared, and another 2 hours to install it. But the reason I chose gates is because my controls are already connected to 2 different pads(USB and Dreamcast), so adding the gates just counts as a third system.
If I wanted to buy some 40 diodes, 10 led's, resistors, and whatnot at Rat Shack, I'd be paying over 10$. Not to mention you'll end up with a decent amount of wiring. If you think you can do it for 5$, what are you waiting for?