the wheel works with lfs. I just got lfs 2 days ago and have been playing non stop...
like your friend i have the wheel ready and waiting for FM2.
you need the wireless adapter, which I got for $20 usd at a local game store yesterday.
the only problem is that theres no force feedback support for it yet. that said, its still way better than keyboard or keyboard/mouse. easy to get the hang of it, and if you already have the wheel then the buying the adapter would be money well spent.
I dont think a DIY usb mod would work for it, considering it doesnt even have a usb plug, its wirelss.