I use a PSX-USB adapter with my CP, and will actually use gamepad extension cables to make two psx ports on the CP itself to plug psx controller right into it (ala Tekken 5)..
As far as mame is concerned, I've found that some people play fighters better with the controller, and some do with the sticks. For fighters, you can use either. For 4 player games, the controllers will become players 3 and 4.