You need an old NES controller. You can probably pick one up cheap online. I already had a few lying around. Then you need a small MP3 player. I used a Coby that I bought for about $20 because I didn't want to take a chance on ruining my good one. You will also need a screw driver, a Dremel Tool or some type of hobby plastic cutting tool and glue.
Step 2: Cutting the Controller
This is probably the hardest part of the entire project (and it's not really that hard). Unscrew the controller cover and remove the guts but leave the buttons. Place the MP3 player in the area of the controller case where you would like it. Make sure USB end is sticking out. Cut out all of the plastic pieces that are in the way and try to make the MP3 player sit flat within the controller case.
Step 3: Cutting the Case
Once the MP3 player is placed flat in the case use a marker to trace the outline of where the buttons and the USB connector will stick out of the controller case. Then cut the area you traced out and place the MP3 player to make sure it fits. Only cut as much as you need. If you cut too much you can't put it back. If the MP3 player is too thick to fit inside the controller case you might need to cut a hole in the back casing to allow for the thickness (as I did). Again, cut only what you need. You don't want the MP3 player to fall out through the hole you cut.
Step 4: Putting It All Together
Next, make sure the controller buttons are in the right places. Then, glue them in. I recommend some sort of model cement. Finally, after the glue dries, place the MP3 player into the controller case and screw the back on.