you could. instead of two buttons, just make it so that it can only switch between 3 mechanical rotary positions. hang a post off the end horizontaly and have two vertical bars engage to limit it to these three positions.
of course, you'd have to adjust the button stuff in mame for xybots, but all in all, you'd have functionality for most rotary games. sounds like it would cost too much for most people though. i mean, most people don't even have rotaries.
What would REALLY be cool is some kind of mechanical switch that would allow the spring and restrictor mechanism like in xybots to be deactivated so the joystick could rotate all the way around for games like ikari warriors. Would probably take some pretty ingenius engineering though.
I have thought about coming up with a multi-rotary concept, but you would have to start with SNK rotaries to get the right feel, correct? The only prices I've seen on those are > $70... which I would think would be an expensive place to start. I suppose the question should be - what handle would people want? The xybots, teardrop shape or the SNK octagonal, or something else?
I don't think this would be too incredibly hard to design - although it will take some thinking.
If I were to make a kit to retrofit a Happs joystick - which one should it be? Super, Comp, Ultimate? P360?
Are there other types of twisty joysticks other than the 12-position rotary (SNK) and the spring loaded, dual microswitch (xybots) type?