I have a basic rule of thumb about deciding if an encoder is needed for a project or not.
If project involves two players simultaneously using joysticks, then it gets an encoder.
If the project does not involve 2 players simultaneously using joysticks, then it gets a keyboard or joystick hack. (You don't really run into blocking with one player setups, unless for some reason you made a one player streetfighter setup, and then picked ALL the wrong keys, then you might have trouble doing that whole "spinning chun kick" thing with Chun-Li.
Of course, I literally have 4 Mame cabinets now, have built many in the past, have two going together for other people at the moment (which need to be done before Christmas), and I have another half dozen games which may get Mamed if they keep pissing me off.
So, when you do it that much, every dollar counts. If you are only making one, then just buy an encoder. (Plus, if you hack enough keyboards and joysticks you can get REALLY fast at it, and good at picking the right ones to hack). In picking the right ones, look for HEAVY keyboards that don't have windows keys, and look for "arcade" style PC joysticks that are not analog.