You say you can see it sticking in the WinIpac program, how does it all function in MAME is it sticky inside mame?
I had problems with my arrow keys being stuck whenever i programed my joystick to u/d/l/r through WinIpac, through some playing i found it just doesnt like these keys, after i bound u/d/l/r to w/a/s/d instead of the arrows the problem went away, not sure what causes this, i dont think the pac unit is to blame.
what happens if you bind those buttons to other keys?