Very cool.
Is it possible with those RGB LEDs to activate more than one colour at the same time? For example if you switched on red and green would the button light up yellow?
Yes, well not more than one color at the same time, but I think RandyT at one time said there were like 50,000 shades by varying the RGB intensity.
Actually, with 48 intensity levels, the number is something like 48^3, which is 110,592. Of course, LED brightness isn't linear and one probably can't perceive the differences in a number of them, but that's the theoretical number.
All I know is that if you want a reddish-orange or a teal or a lime-green button, you can do it.

Symmetry in video. Zoomed in blurry with slow motion pull out slow turn slow motion push in to blurry zoom.
Good products and academy award winning movies. What a guy. 
You liked that, huh?

this would mean that each light would eat up 3 channels of the LED wiz, yes?
Correct. However, with careful planning you can do the color changing on the important ones. I would say that would be the first four of each player should be unique and that would use 24 inputs. The remaining buttons could be a fixed color and shared, so that would take another 3 or so for 27 inputs. 5 left, so one for each player start, and you could share the remaining 3 for the Joystick directionals or dedicate them to a knocker or other devices.
At least that's what I'll be doing (if I can ever find the time)
RandyT
*edit*
Forgot to mention....if you don't need all three colors, you don't have to connect them. Suppose you wanted a particular button to be any shade achievable with only the Red and Blue colors. This would get you the two primaries and about 2000 shades of red purple and blue.