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So I noticed that even though this and the original Ghosts 'n Goblins are absent from pretty much all lists of games that support/require 4-way joysticks, they still seem to require a 4-way stick when playing with MAME. For instance, if you're playing with an 8-way stick and do not use only the 4 cardinal directions (such as doing a down-left or down-right diagonal), your character gets stuck either crouching or standing still. The game seems to get confused whenever you use a diagonal direction, just like any other 4-way joystick game like Pac-man or Donkey Kong.
Also, on the game's official control panel overlay (https://i.imgur.com/3S9lBnU.png), the artwork around the joystick clearly implies the use of a 4-way joystick (also the stick in this screenshot is a 4-way stick).
I just found it odd as to why this game and Ghosts 'n Goblins are not on any lists of 4-way games when it's absolutely a 4-way game. Just throwing it out there in case anyone else runs into problems running the game with an 8-way stick like I did. Very frustrating when playing such a difficult game like this or the original GnG.
Weird that the Genesis and Master System versions don't have this problem despite their inferiority - I guess they updated the game's code to enable the use of an 8-way controller for those versions.
Yeah 100%. I'm running GnG in my custom built cabinet with a Sanwa JLF Stick. The game didn't feel like in the past. I had extreme problems with crouching and ladders which was very frustrating. So I switched the restrictor plate to 4-way. And voila, its perfect now. Much easier to play :-)