I recently bought a new PC, it has an empty Disk Drive slot and my mother board has an unused USB port. I wanted to know how logical/useful do you think it will be to make a custom front panel IO board using the Arduino.
I am thinking of having a few buttons, and rotary encoders. Configure the Arduino to mimic a keyboard and assign custom shortcuts to these buttons. Maybe use one of the rotary encoders for volume.
Another option is to also have a small integrated LCD display just to display a single line of text or something.
Does something like this already exist? Am I missing something that may not work/will go wrong in this setup?
Positive criticism is welcome for the idea
An Arduino Pro Micro is a nice, small board that is HID compliant. I recently saw a project that included three switches, each programmed with a password (press a switch and the password is entered): since most vulnerabilities are online, if you password protect something like a log in, it simplifies things to have a button enter a password for you. Add a 0.91" 128x32 OLED and when you press a key, display a message (e.g. "Windows login").
So you only have ONE USB port free.
Why do you want fill it with something kind of permanent, you may need to use that port in the future for some new or testing some peripheral, or USB stick.
I would be using it to support a USB hub for extra USB capability.
You can buy hubs that fit the disk slot.
Tom.. 
I think that @HimaSava is stating that the port on the motherboard is not broken out to a USB-A / USB-C connector on the case; I'm quite sure that there are already plenty USB ports on OP's PC (though with Arduino as a hobby one can never have enough ).
Maybe one of us needs to have another I just had my first one of the day 
Yes indeed as @sterretje mentioned, I have enough USB ports on my PC. My motherboard has a few extra that I am not using currently because of my case.
@timinelmira, I will take a look at the pro micro. Since I want to convert this PC as a home server in the future and use it in a headless way, maybe I configure some other functionalities to the buttons. But thanks for the input.