Your layout is really close to the one I settled on (at least I think I have, as it may change after I build it once). The differences are that I put the mouse/trackball buttons up on the top. Also I put two more buttons above that (mapped to P1 button 1 & 2) for use in games like tempest or for use with the 4-way. Further, I added another top fire joystick right next to the other for use in tank games. I suppose you can use the 4-way for this, but I wanted them to have the same feel and be close to each other. (actually these will probably be hacked triggersticks instead of top fires, as I like the feel of that better.) I also don't have the problem of the side walls like you do, so this may or may not be an option for you.
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