Touch-Sensitive scroll wheel (like original iPod)

Hey, so I want to work on a project that will mimic the original ipod's touch sensitive scroll wheel.
It doesnt need to be as precise, just enough to scroll through 10 or so options in a menu.
It will need to know which direction you are running your finger over the circular pad.
It also needs to be all self made. By that I mean buying basic components and building it from scratch, not buying a kit or something that does it for me.

I am still quite new at electronics and arduino (high school level), so I am coming to this forum for advice and guidance.

I have made some touch sensitive buttons and played around with the cap sensing found here: Arduino Playground - HomePage

My idea so far for this project is to have 3 "circuits" connected to different pins on the arduino to read and different pads arranged in a circle.
I am using 3 so you can tell which direction the finger is rotating.
Here is drawing of what i mean:

So I could then write a program that detects if the pin sensing the largest capacity is changing from red, green, blue to tell the menu to scroll counter clockwise or vice versa.

Does anyone have any suggestions or ideas to make this simpler/ better?
Any feedback on this idea would be very helpful! I will test it out soon. But I might try the same setup in a linear configuration first as it might be easier.