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I have the same problem (using an xbox360 controller); some psx games can’t be run with analog sticks, dpad works sluggy or not at all:

You can switch the modes ingame, using a toogle button on your controller (you have to set one before) + F1. It opens RetroArch’s menu (see my linked thread, there’s a video); but it’s quite a nag changing it everytime.

A sort of launch option would be cool…