Interesting. Do you happen to have the link to the person who it didn't work?
Nope! Don't remember where I saw or read it, but I heard about the incident on more than one occasion.
I've heard of problems with sega's dreamcast controllers, but not the 3rd party controllers. Sega was using hall effect sensors, while 3rd party were POTs. Maybe I should test it out on my brother's ps2 controllers. 
I have re-entered the thought of using the Sidewinder Dual Strike. This controller is a simple pot base and it is known to use a 5k input, which is what standard "pro" arcade controllers use. Successes are much greater with this controller.
Running through the mappable buttons, the Dual Strike has one less button than the Play Station 2 controller. Using Windows games, the Dual Strike has a shift function, but this is a software option and not hardware like the PS-2 is. However, you do have an analog x-y input with the Dual Strike, so that is the trade off. It is very much possible to have an analog stick AND a digital 4/8 way. However, I don't know how that would work with games like Robotron or even more important, tank based games (where the joysticks should be identical).
If I could make use of the x-y analog axis for a digital input, I would actually gain 4 more inputs, and could easily attain a two joystick 6 button, player start (1,2) AND a coin up button. So going that avenue, this would yield more inputs than the PS-2 (in digital mode).
Another thing I like about the dual strike is that should I need analog inputs for another control panel (say a driver panel), I could simply "wire up" the panel as such and still use the same Dual Strike controller as an interface. The wiring is easier on the Dual Strike as well because you have pin headers which terminate in wires. So you can wire these to a terminal block (or computer DB connector) for easier wiring purposes.
Granted I did look into the PS-2 controller because of the analog mode, but because this mode is not a default and because of the issue I read about, the analog mode with the PS-2 has become less attractive to me for analog use.
If I do end up going the Dual Strike route, one thing I really wanted to do for a first analog project would be to re-create the throttle lever used on Lunar Lander. After playing the real McCoy, it is hard to go to tapping digital buttons for the thrust. BLECH!
I tested a Dual Strike last night and within Mame I mapped the analog y-axis to the throttle for Lunar Lander. Ahhhhh, it works like a DREAM! The thrust is proportional, like the way it should be, not all on or all off.
Geo