That would be a much better layout I think. I'm a bit concernd about attempting to extend this flexible material though. I'm not sure how well I could connect to it, or how long those connections would last.
I hope you fare better than I did. I tried to help on a PS3 controller modification (tying into the lines) and because all of the buttons are analog and connected to a flex circuit which is just pressed onto the board (no connector) it was absolutely miserable. We tried soldering to the pads on the board, then it made a finicky connection instead, I tried attaching a wire to the flex circuit thinking that it was copper like similar circuits, and the ink came off, it was just terrible.
My suggestion, get a PS3 compatible USB controller and hack that, all digital, you can move switches around, hopefully no nasty sony flex board in it, etc.