I like this demonstration of an alternate input device by Paul Bishop. He built an Arduino light pen using an Arduino, television, and photoresistor. It works by displaying a series of flashing boxes on the screen, and using the photoresistor to measure if there was a change in the amount of light that it saw before and during the flash.
It seems like a fun way to play around with making your own input capture device, however I suspect that the flashing light might get a bit annoying after a while (unless it could be built into the thing you are interacting with?). It might also be interesting to try a binary search method to figure out where the pen is, which would let you check a much larger part of the screen than just a few buttons.
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