Is it only certain games that its doing it on?
So after messing with it further, the problem only seems to occur when you select the same 8 way game twice. So, if you select NBA Jam with the sticks in 8 way mode, everything works fine, but if you exit the game and select it again, the sticks change to 4 way and everything freezes up

. From that point they will no longer switch modes for that game until another game orients the stick in the opposite direction (whatever that might be). The problem does not occur when the same thing is done with a 4 way game.
Are you manually moving the arm back and then trying again?
No, I haven't touched the arm at all. I've just been trying to track down what has been causing this weird behavior.
Have you checked to make sure that the arm is moving freely and is not getting stuck by anything?
Yes, everything appears to be moving fine. It certainly doesn't seem like a mechanical problem by any stretch.
Are you using the correct control.ini based on your MAME version? (not sure if that matters though)
No, I was under the impression that the 141 control.ini was the newest available version, so that is the one that I have been using.
Glad that you're not experiencing the same problems, I'm going to check which version of Mame I am currently running and see if I can hunt down the correct control.ini file if there is one to be had and I'll let you know if I get any results...
Any other suggestions?