I'm using a pad (2 pad in fact, the 360 usb, but the d-pad sux and the stick is not adapted for quick move, and the madcatz street fighter pad, with a real d-pad).
It takes some time to feel it (the diagonals move are hard because the d-pad is much larger), but it's pretty good.
The problem of the 360 pcb based pad are that touhou only recognize the stick, and not the d-pad. You must install a remapper (like x-padder, but it's a shareware now I don't know if you can still find its older freeware version) and map keyboard on the pad, and voila, it works fine.
For the ps3 pads, you must install drivers. Problem is if you're using seven 64b (and maybe Vista 64b, C/D needed), you can't install an unsigned driver. There are workaround, but it's dirty and not timeproof: Microsoft often patch the workaround.
Didn't tested an arcade stick but I think I will in the feature (maybe I'll buy/make one when SSF4 is here).
Oh, first post btw, hey. o/