*I don't work for GGG, so if I've got any of this wrong, sorry, but tough. Use at your own risk, blah blah blah.
Depending on which version of the GP-Wiz49 you have, it shares the same circuit board as one of the other GroovyGameGear encoder products, so the silkscreening is the same. Sadly, that means that the silkscreening is wrong, or at least confusing, on the GP49. Here are the wiring instructions for the 3 different versions of the GP49:
http://groovygamegear.com/PDF/GPWIZ49_ECO(K).pdf (older, shares PCB with older KeyWiz)
http://groovygamegear.com/PDF/GPWIZ49_ECO(X).pdf (newer, shares PCB with newer KeyWiz and regular GPWiz)
http://groovygamegear.com/PDF/GPWIZ49_MAX.pdf (Max board, with screw terminals. Shares PCB with regular GPWiz Max)
Those UDLR inputs you have your sticks wired to are the UDLR inputs on a standard GPWiz, but not on a GPWiz 49. On a GPWiz49, the inputs
labeled as UDLR are actually gamepad buttons. The
actual UDLR inputs are numbered 1-8 on the PCB, but cannot be used with a regular 8-way joystick, they are for use only with a 49-way. I have actually played around with trying to "trick" those inputs into working with an 8-way, but haven't ever made it work. I suspect it will take some extra electronics between the 8-way in the GPWiz49 board to do the job.
If you really want to use the GP49 with an 8-way, all you can do is re-map the controls in MAME, so that the gamepad button inputs you have your stick wired to control the UDLR directions, instead of the MAME default keys.