I got the game to work, here's how I did it:
1. Press Tab and select "Input" DEFAULT EVERYTHING!
2. Assign the keys to your preference.
3. Go to Devices & Ports: Make sure your mouse controller is under "Analog Devices:
Check "Allow all 4 directions on joystick."
4. Uncheck "Grab mouse in emulation mode" and "Use control key combos"
5. Load game, press tab and choose "Game properties"
6. Under "Controller" tab, pick P0 controller as "Paddles" and close menu.
7. Press the "`" on the top-left corner of your keyboard.
8. Click the I/O tab, look at the middle-left spot under "SWCHA (W)" and the first "0" will turn red.
9. Close the debug menu and do a complete restart on the emulator.
10. As soon as the game loads, move the directional keys and click the mouse.
11. Enjoy!