OK - I got a dremel tool and used a grinding tip to reshape the internal diameter of the controller socket, making it larger. It worked and I can use all 8 directions of the pad! I finally can play Green Beret.
The internal circle on my GP32 is almost 1/2 inch in diameter, just a little bit less, between 3/8" and 1/2". And I have no troubles hitting any diagonals, Playing Contra 1 is a joy since I can hit all diagonals easily.