This was my assumption as well. We were considering creating a Playstation controller drive system (just for fun) but decided that, even if we did (which I believe we probably will in the upcoming month or two), it would be illegal if it went through a PC.
The alternative to PC control, which I do believe is allowed, would be to create the interpreter using digital circuitry, transistors, and/or logic gates. For the most part, the circuit can be done simply through basic logic although a microcontroller may be necessary to communicate with certain serial-type controllers (PSX included). For more info on how console controllers communicate (systems from NES to N64 -
not only Nintendo! 
) check out
http://www.arcadecontrols.com/Mirror...pro/index.html and
http://www.gamesx.com/controldata/psxcont/psxcont.htm. Following instructions on their site, and one other, I was able to create a PSX->Parallel interface and simple driver which could be easily converted to work with separate circuitry rather than a computer.
Feel free to PM me if you have any more questions. I'll be sure to post a thread and pictures as soon as our team gets working on the controller project in the next weeks.
**EDIT
Now that I think about it, I seem to be having a Déja-vu about this topic. I think I may have posted this same information last year (or possibly the year before). I'm too lazy to search right now but if anyone wants to, feel free.