1. With the Happ Super 8's.... i plan on doing a top mount, but what are the measurements i would cut for the hole (for the joystick to fit into)? And what tool should i use to do this? Jigsaw?
I would highly suggest bottom mounting the joysticks. I think you will be much happier with their appearance and that is how they are intended to be installed. You can use a 1-1/8" spade drill bit (same for buttons, except Wico translucents which need 1-3/16") for the center hole. If you use a 3/4" thick control panel, many people recommend you route 1/4"-3/8" recess for the joystick base. In the below pic you can see how I have the joystick base recessed into the control panel. The reason for the recess is so your joysticks are a bit taller.

2. For the buttons, i know you have to drill the holes with a 1 1/8" Drill Bit, I know its not a screwdriver drill bit, whats the name of it? Also, could someone provide a link to it on a website i could buy it from?
Spade bits are the cheapest way to go. They will dull quicker than hole saws or Forstner bits, but they are very easy to use. A Forstner bit is probably the best type of bit you can buy for making holes, but they can get expensive. Your local Home Depot/Lowe's/Ace Hardware will have the 1-1/8" spade bits and you can expect to pick them up for around $5 I'd guess.
3. I plan on screwing the IPAC to the wood, what nessary steps should i take to make sure the Ipac is on properly? Can it touch the wood? Do i need anything to keep it from touching the wood?
Definitely use some kind of standoff or PCB feet. In the above photo, you can see I used standard PCB feet to secure the I-PAC.
4. Does anyone know of a tutorial that can teach me to apply quick disconnects to gauge wire?
5. What type of gauge wire and why? People keep telling me whats the best, but its always different from what someone else said!
I have used many different kinds of wire for control panels and I have found the easiest to work with is 20 or 22 AWG stranded. You can find this in a local Radio Shack or other electronics retailers. It's typically referred to as "Hook up wire".
With 22-18 AWG, you will need to use the "red" female disconnects for all your buttons. Most arcade controls use
the 3/16" size connectors.
To connect the disconnects, simply strip off about 1/8" of the wire insulation, insert the bare wire into the connector, then crimp the connector.
A cheap wire crimper will make this much easier.