Thanks for the suggestions Howard. I'll have a look into virtual controller programs and see if it offers any solution. At present I'm using Motionjoy DS3 tool with three PS3 Dualshock 3 controllers to emulate Xbox 360 pads, I must admit I didn't think to check if the actual program itself lets you change the sensitivity - I'll see if I can make any changes with it.
One workaround I experimented with this afternoon is to go back to a LAN set-up with one of the PCs emulating two versions of Model 2. This PC is also operating in Dual Screen mode, so each player gets a screen of their own (for a three player set-up) which means at least two people will be able to use wheels and only the third will have to put up with a joypad. This 3 way link-up also worked for the latest version of MAME, but that creates even more problems as far as inputs goes, as although you can turn global inputs on in MAME (for multiple versions running on a single system) only the in focus window will support direct input and Xinput, meaning someone's going to have to play using the keyboard (or joy2key, meaning a pad but no analog controls).
Edit: There was indeed an option within DS3 tool to change the X axis sensitivity. I've changed it from it's default value of 12 up to 66 and that's done the job nicely. Daytona handles ok with a pad now.