even tweaking analog controls in MAME the games act like there is an 8 way joy switch instead.
Do you have something mapped to AXIS INC and AXIS DEC (or similar)?
Those are for when substituting a digital joystick for an analog one.
You should not have anything mapped to those if using analog controls.
If you map an analog stick to those,
any movement will basically be treated as the switch on a regular joystick being tripped.
Only the Axis should be mapped.
Don't forget to reduce the deadzone in mame.ini and tweak the sensetivity in mame's in game menu (F2) for the best experience.