C64 Cynthcart Controller

You can power it with 5 V no problem, and the circuit isn’t using a lot of power so using the C64 supply should be ok.

However, note that the Arduino power is misconfigured; you should supply +5V to pin 27 (+5V), not pin 30 (VIN). See here:

Using 100k instead of 10k may cause problems, though; the analog inputs on the Arduino have a sample and hold circuit with a small capacitor, and they recommend that the circuit driving the input has an impedance <10k. See here:

EDIT: To clarify, the maximum output impedance of a potentiometer divider is R/4 (half the resistance in parallel with the other half), so a 20k potentiometer would be ok, but 100k is pushing it.