In terms of USB vs PS/2, The main difference is that USB is "hot swappable." You can plug and unplug it without rebooting your computer. USB does not work with DOS. USB also has a 6 keystroke max at any given time. This might be an issue with a 4 player control panel.
USB is "officially" hot-swappable. I hot-swap my PS/2 KeyWiz all the time with no issues, but YMMV.
USB will probably work with DOS MAME under Windows and may work in pure DOS depending on your BIOS.
USB
Keyboards have a 6 keystroke max at any given time (plus modifiers such as Ctrl, Alt, and Shift). The Ultimarc Encoders have the following limitations when used in USB mode: Simultaneous limit of 14, 16, or 22 keys plus multipliers. Key-Repeat is enabled on all keys. In PS/2 mode, key repeat is only enabled on the Up and Down arrow keys.
You get the cable either way, unless you order the I-PAC VE. Then you need your own USB A-B cable from your local computer store.
Also, you might confirm with Andy, but it used to be the $39 I-PAC was PS/2 and the $43 one
added the USB cable, so it was useable for both. I would go with this option, as you can then use whichever one works best for you (if for example your replacement motherboard in five years no longer supports PS/2).