I had the same problem with walking diagonally using my XBox360 gamepad. I assume it is because the analog stick doesn't move far enough to send maximum values to the game because it moves in a circular fashion instead of a square.
Uh... know what I mean?
The only solution is, sadly, to use a button wrapper and forfeit true analog control.
A lot of people suggest XPadder. Personally, I think Pinnacle Game Profiler is much better.
I made a few profiles on the GOG boards, perhaps I add a Prince of Persia profile...
EDIT:
I added a profile some time ago. Here's the post:
Some people, like myself, have problems with gamepad support.
For some, the prince doesn't always run even though the push as far as they can.
Others cannot assign L and R triggers.
So I created this profile for my XBox 360 gamepad with the Pinnacle Game Profiler, which can be downloaded here:
http://www.megaupload.com/?d=8BZGCMAP This is a profile for the Pinnacle Game Profiler which can be downloaded here:
http://pinnaclegameprofiler.com/
I think my profile comes very close to how the game was controlled on the PS2 (and possibly the XBOX) . The button layout is exactly as it should be and running/walking by not pushing the analog stick all the way works great.
It's not perfect as it is no longer true analog control but that's a minor issue and herdly noticeable during gameplay.
Please try it (Pinnacle Game Profiler is free for 30 days and costs only 20 dollars) and give me some feedback what you think.
Why using Pinnacle Game Profiler instead of Xpadder?
Well, in my opinion, Pinnacle Game Profiler not only is a lot more flexible it costs the same (I think) and, well, just looks like a more professional software.
There are also some features that I really love, like the way it sits quietly (and rather memory friendly) in the task bar and automatically detects whenever I start a game that I made a profile for (and, of course, automatically activates the profile and deactivates it after I quit the game).
I also use it for games that do have gamepad support but cannot assign the L and R triggers of my XBox360 gamepad (like Psychonauts for example). So I just create profiles with only these two buttons assigned.