I have the same setup and it worked for me. You should just have to go into the TAB menu within a game and go to player 2 controls then where it says p2 up (or something similar) hit enter and then press up on the second joystick. It will look like a button press on joystick 1 to the computer, but as long as they are all configured that way it's OK. That's the way I did it in MAME32 and MAMEplus. I am not sure why it wouldn't work. Do all the buttons work? MAME will see them as joystick 1 button 1-28 (including your player2 joystick)
On the bright side once you get it to work, you won't need joy2key for mamewah, it has native gamepad support. Setup for it is a little more complex, but not bad once you get started. I went into the game controller settings in windows and wrote down what gp buttton each button on my cp was registering, then SUBTRACT 1 from each of those numbers. The computer sees button 1 as button 0, but windows tries to make it easier for people with problems with zeros by bumping them all up to positive numbers. Now configure MAMEwah using these numbers in the way shown in the docs for MAMEwah.
It can be confusing to see your joystick register as button presses and it helps to think of the whole control panel as joystick controller 1 because it also seems odd when you are configuring joystick 2 and MAME keeps calling it joystick 1.
Good luck, hope this helps, if not I'll try to help some more, unless somebody else can fix your problem more eloquently.
