I'm not sure about the answers to questions 1 and 4, so I'll not attempt to answer those.
2) Is there a way to get the functionality similar to GameEx where you can hold down a button to switch from "I'm moving through a list one by one" mode to "I'm moving a letter at a time or a page at a time" mode?
You can definitely move a letter at a time. For example, I have my joystick set to go to the next letter when I press right or the previous letter when I press left. Bring up the option screen (right click anywhere when MaLa is running, and select options. Then click on the Controller tab. In that screen you'll see options for "X <up | down>" and "Letter <up | down>", amongst others. Click in the field you care to modify, then press the button or joystick direction you'd like.
I see that is possible if you are okay with the joystick doing just two things. What I want is:
1) Joystick up/down to go through the list one at a time
2) Joystick left/right to switch lists
3) Joystick up/down+button 1 to move through the list a page at a time
4) Joystick left/right+button 1 to move through the list a letter at a time
This is an extremely effective way to get around the frontend without a lot of inputs.
3) Is the source code available? I'm a programmer and wouldn't mind helping out as time permits to at least fix the problems that I run into and submit diffs.
The source code to MaLa is not available. Loadman has just recently taken over development from Swindus, and as I understand it Swindus made Loadman swear on his first child that the code would not be released. I know many people have offered to help as you have but to my knowledge Loadman has held true to his word.
I hope this helps.
Good luck!

That's a bummer. It may mean that I won't be able to use MaLa since the things I want fixed probably aren't a high priority for Loadman.

I may just end up writing my own front end for my purposes.