Hm, I think for that kind of effect smoke and mirrors would be the way to go, as FFT is probably a bit too CPU costly.

My first impulse would be to couple a frequency detector with a bandpass and quantize the output. Maybe I'll give it a try!

Haha, that's really neat! I'm always on the lookout for unique bitcrushing/distortion effects and that GUI is really groovy. I've always wanted to make a VST that emulates mp3 compression in real time but I'd never know where to start with something like that

This may only be of interest to some of you, it's not exactly a chipmusic effect, but.. well, maybe someone will make good use of it.

I've had this WIP VST effect around with which I tried to add bad reception effects and distortion like on a SW radio on a signal. I recently used it in a track and thought maybe others would like it.
The emulation of the effects/filters/etc are not perfect, but sufficient I think. At least for some settings you can produce a pretty good approximation.

Controls are very simple. There's an on/off switch in the upper left corner. The small dial next to it controls the dry/wet mix.
For the actual effect, I've tied all effect setting to a single value, so you can explore settings for something nice.

The button row on top selects the 'band', which is of course just different effect offsets. The big knob on the right controls the 'station', which adds to the same effect offset, but in finer steps.

I recommend additional filtering of the signal before input, you can get nicer results like that.

This is what it sounds like with an old Billy Murray song

Link:
http://www.milkcrate.com.au/ub/RadioMoscow.zip