This was a few years ago but I did record my goals for the initial revision of volcon:

• The optical encoder parts (sensors and disk) were salvaged from an old track-ball.
• The "knob" was made from the head drum of a VHS VCR (remember those?). This is the part that spins and is used to adjust volume on my PC.
• The optical disk was fixed to the shaft and optical sensors mounted off some strip-board and attached to the base of the drum.
• This assembly is mounted to a custom PCB with some nylon stand-offs. The PCB became the base of the whole unit.
• I cut some wooden rings to enclose the electronics and the base of the VCR drum.
• The custom PCB was designed in eagle and etched at home from some single-sided copper-clad board. The circuit was designed around an AVR at90usb162.
• The code is written in C and implements the LUFA library developed by Dean Camera.
• The whole unit plugs into a PC via USB and is automatically identified as a HID - no drivers required (tested in Debian Linux and Windows).
• It's a very simple device - rotate clockwise to increase volume, counter-clockwise to decrease.

Rev 1 PCB was a home-made etched job.  Some minor bodging required:

PCB top-side:

The first revision was pretty ugly: