Its highly unlikely that your dreamcast got screwed up. If it did you would know it (as in all the ports will suddenly stop working when you blow the fuse).
I've had some strange problems with moves that simply wouldn't work, and turned out the happ 8 way I was using had the hourglass acutator turned upside down (so one player was in 4 way mode...duh!).
Check to make sure all diagonals and directionals work with standard moves first. Try to isolate which direction isn't working. If everything is fine, and you think its a timing thing, then its you and not the console (sorry).