What you will need:
# 1x 9 pin serial cable (half of it) - with a female connector
# 2x 470k potentiometers (I used 500k, and they work super - All Electronics Part)
# 1x Enclosure box (270-1802 from Radioshack works nice)
# 2x Knobs (274-0416 from Radioshack are pretty)
# Soldering iron (and solder)
# Wire cutters, strippers
Step 1: Map the connector
I just stuck a little piece of wire into the hole and used the continuity setting on my multimeter to find the wire that coincided with the pin.
(For example: brown to 5, blue to 9, yellow to ground etc)
*IMPORTANT note from tomtiki*
Unfortunately this did not work for me when connecting wires marked ground on diagram to pin 8 (ground) on the controller port, so I asked Mr. Google.
Wires marked ground in step 4 should actually connect to +5v, which is pin 7. See diagram here :
Here is an explanation of how the paddles work (see "game paddles" section):
If you have Atari 2600 paddles, they will work, but the pot in the Atari is 1M ohm rather than 500K in the Commodore, so after you turn the knob halfway, there is no change.