You are correct about the 49-way control, and yes it can be replicated.
I'm currently using MAME-2003 and a PS4 controller. The left analog stick absolutely works well with Sinistar. When playing, gradually rotate the stick and you will see it handles more than 8-way control.

FWIW: I couldn't get the same results with MAME-2003-Plus. I think it has special configurations to handle analog, but I never researched, as 2003 (standard) does the job well.