In the config menu "control for this game"
there were choices like "up-right".
I guessed that it means
(Left Joystick : up) + (Right Joystick : right)
which registered as "UP + Y" which match the joystick encoding...
I did the same for all 16 combinations...
I don't think so (see below).

Was that the right way to configure it?
Mame has 12 player 1 digital joystick "directions":
4 normal joystick (up, down, left, right)
4 left stick of dual stick (left_up, left_down, left_left, left_right)
4 right stick of dual stick (right_up, right_down, right_left, right_right)
Dual stick games have the left_* & right_* inputs. Just map your left stick to the left_* inputs, and your right stick to the right_*.