I'm doing something similar in my project. I asked the same question about lighting the directions and according to my reply, Mala can light four directions but not the diagonals, I may be wrong though, this is just what I have been told.
As for lights, for my project I have bought a length of 5mm diameter plexi rod. I am going to flush mount approx 6mm lengths of them in the eight positions around the joysticks and then back light them from behind with a 5mm LED. I'm going to roughen the 'back end' of the plexi rods to diffuse the light from the LED.
It may seem a bit pointless using 8 lit positions if you can only light four of them within Mala but im using 8 as the rings should look nice for the attract sequences I have planned, in fact I have one LED Wiz just four the rings around the four joysticks.