Most of the cool hacks these days are done using the N900 for obvious reasons. For this little experiment, I needed the good old N810 with its USB Host Mode (as the N900 doesn't support USB Host Mode right now) to get things going. An alternative approach would be to use BlueMaemo running on a N8x0 (with a USB device attached) acting as Bluetooth HID device for the N900 and running pyDance from the N900 on the big screen with its TV-out.
Here's a walkthrough video on how it's done:
I hope to post the packages needed to get this going shortly. Attila was kind enough to package the joydev.ko kernel module for Diablo, so we're just missing pygame/SDL_mixer with OGG support in the repositories. It's not Stepmania, but it works just as well with only minimal code changes.