If so how well did the 'restricted' stick work as an 8-way?
They actually work quite well as an 8-way.
They just don't have as much of a diagonal as an 8-way restricted stick does.
It's not difficult at all to hit the diagonals, when you want to.
Anything between the two directions will register as a diagonal.
What the restrictor did was allow you to hit the true directions quickly, not prevent you from hitting diagonals.
During the lightcycle stage, you have to push the stick very quickly to the direction you want to travel.
If you move it too slowly, you will still get the zig-zags, and die.