8 directions would be limiting if Touhou allowed more than 8 directions, but those of us with bendy analog sticks are stuck to 8 directions too, and yes, I would agree that a keyboard offers a degree of precision more than analog.
I play fullscreen, using an XBOX 360 controller. (A to fire, X to focus, RB to bomb, analog stick to move. Objectively, I stand by the above statement that having a digital input for your movement offers higher precision, but I personally prefer the feel of an analog stick, even if it fails to offer real omnidirectional motion.) I also, aside from rare cases (generally involving grinding spellcards in IN Spell Practice, StB, or DS) require listening to the in-game music to play, otherwise, it just doesn't feel right. I"ll wear headphones if I feel like the music might get on anyone's nerves (if I'm playing a straight run, less likely so, but if I'm grinding out a single stage and hearing the same music repeat over and over as I restart, I don't want to subject anyone else to that). As for shottype, Needle Reimu forever.