Here's a form post that goes into it.

Make sure you have analog button enabled on your controller. Go to options. You have to press "Select" (if I recall correctly) in the controller config screen (it should tell you at the top of the screen). Then you select "Steering" and press left/right on the d-pad to select analog/digital steering.

Disclaimer: I haven't had to do this in years, but that sounds familiar.

Open the game and hit the playstation button (or home, whatever you want to call it) there should be an option for the controller type that the emulator sees.