Sorry man, I doubt your goona find any help on here or anywhere really on this problem.
Your best bet is those old mech2 newsgroup and doing a search there to see if anyone else had the issue in 95'-97'.
99% of the people here use a keyboard and mouse since the torso twist on the joystick is bugged and is not able to do a full torso twist.
This puts all joystick players that play online at a significant disadvantage because of the mirror bug. Since that is the case, there are very very few people that can help you diagnose a joystick problem.
I tried it before and just resented it!
As did I at first, until I realized that it ran mech2 better than my old legacy machines do.
I have gone the legacy comp route many times over the years, and know what you mean about the feel.
I was the same way and resisted dosbox giving credence over to my old machines, but after a while I gave up because I realized that the same feel was not worth the trouble I had to go through everytime I wanted to play the game.
It ended up that with some tweaks I was able to get most everything working exactly as I had it before if not better.
I do not expect ya to come to the same conclusion as I did, nor agree with the route I went, but the point that I am trying to make is sometimes newer is better than what was in the past.
In the end the only advice that I am able to give you is to go get the 95 Vanilla version,(In another words non-titanium/battlepack), and run it on 98 with your legacy comp.
Your joystick will probably work fine going that route. DOS is very finicky with drivers.
I am sure though if you keep trying with the DOS version you probably can get the joystick running, but it is not going to be easy as going the 95 route. (incidently the versions play exactly the same and look the same except for the GUI which is a very minor detail.)
One nugget of interest though for ya before I finish my post.
Truly, with mech2 dos there is a thing we cannot duplicate though even with a legacy Pentium machine. Unless it is a
486DX2 or
similar the game will never be identical to what the designers intended.
Repromancer a few years ago wrote about the long intriguing story on the trouble the Pentium processor caused to the code that he wrote.
He also wrote about the whole developmental nightmare that became mech2. You called it a pain rightly for it was a pain, a pain to develop.