Frank Buß started a project to connect a digital joystick to a PC using the USB interface. On his web page you can follow the step by step progress of building the interface. The interface uses Freescale microcontroller that will simulate a USB keyboard and translates the joystick signals to keyboard signals. The firmware and schematic of the interface can be downloaded from the web page. It will cost about 20 Euro to build the interface.

YouTube video of the C64 USB joystick adapter.