I'm not much help, as I don't have a CC board and the schematics I've seen are like yours: they are of a different board with different pinout. However, maybe enough to head you in the right direction....
I found your post on
mebmagic, and this part rang some bells:
I attached a Happ trackball to it but the dude only shivers when I move the ball....
One of a few cases is happening. A) CC didn't use the standard x1 & x2, or Xa & Xb, raw quadrature, B) you have exactly one out of two TB movement pins wired correctly for both axes, C) one sensor or IR emitter or wire is busted or dirty or shorted on both axes, D) atari is expecting active high, the happs TB is sending active low, E) the emitters aren't getting quite enough power for both to be seen by the sensors.
A) is doubtful as atari was AFAIK all quadrator, but the schematics I've seen for CC list as if it's either not quadrature, or it's 1x (can see one movement per tooth in the encoder wheel).
B) & C) are possible, as is a combo of the two, but to it to happen to both axes at the same time is unlikely coincidence.
D) is a low possibility too. All TBs on sale now are active low, but IIRC atari had a few active high TBs early on. I don't know about CC, but football was active hi, and missile command used the same TB, and there was a MC to CC conversion kit, so it's possible, maybe.
E) I've seen this happen on USB ports. Not sure if the equivalent can happen on PCB boards, though.
If I had to guess, I'd go with B) or E), as long as the TB works on a different game.