Still, a USB phy is required. How would you solve this problem? Would a FTDI USB chip be more palatable?

Who knows. Perhaps a Verilog implementation on an FPGA? Discrete gates and GPIOs galore?

Sarcasm and FTDI chips aside, I'm hoping the point was clear. Guess it wasn't.

Using USB as the physical transport from dongle to CPU just introduces more black boxes in a system where everyone was bragging about no black boxes. But since we're past the age of parallel ports and discrete GPIOs on these machines, there doesn't seem to be an easy answer.