Have you tried clearing the input and re-assigning it?
It may not be on the right device/axis if multi-mouse is enabled.
Mame Menu - Input (General) - Player 1
1. Clear Dial Analog, Dial Analog Inc and Dial Analog Dec (highlight the input, press enter, press escape)
2. Assign input to Dial Analog (press enter then turn the spinner) Leave the Inc and Dec as "none"
Scott