I'm sorry my english is not the best, but when you guys say that just one game wasn't possible to play correctly you say it about neogeo games at all (I think) or you say it about every freakin' game known tried?
the best option in avr mcu in DIP>14 is AVR90s2313, it's the easiest AVR mcu to buy, and if programmed to be on standby most of the time, will probably reduce consumption from 230uA to 80 or less micro-amperes, 2k of program is more than enough for that, but let's nevermind this mcu approach..
I think that stick push is necessary, altough pretty lame, a lot of times I try press it when I should not (playing battletoads on snes for example), so perhaps the best way is to have a true standard d-pad and a stick push button somewhere else... imho
also a center-placed stick push on a D-pad will definetely need software or microcontroller support to supress all directions and signal center when center is pressed/hold