potentiometer level passing keyboard combination

I working on an mame arcade which with have a exterior knob which allows you to change the game by twisting. IE: changing the channel/game. I'm thinking I can use a arduino to read potentiometer input and output keyboard trigger to an auto-hot-key script to exit the current game switch to the next game.

Do you think this could work?

Is there a better way to do this?

Where should I start?

Thanks

With a rotary encoder you have the choice of physical detents to give feedback to the user...

Perfect. Thinking of using this Rotary Encoder Rotary Encoder - COM-09117 - SparkFun Electronics

And also found this handy tut of "reading a rotart encoder" http://www.circuitsathome.com/mcu/reading-rotary-encoder-on-arduino

Now just need to figure out how to interface with auto-hotkey.... Any takers?