Fully agree with you!
Just does not make sense.
But the first time i tried it out i got no diagonals whatsoever.
Up,Down,Left,Right as far as ive used the stick are working fine.
The actuator most definetly thin side pointing towards the e-clip which is towards my feet. No problems there. Unless they maybe used the wrong actuator.
I have also tried the stick on my friends PS2 which is an older model and still the same issue.
Like i say im going to use the PS2 without that VGA converter box in case it is causing any problems and will see how that goes.