I actually didn’t do anything about the PSU. I simply left it as-is and let it just pass through the controller, out to the system as normal, snap off when not in use.
Being that I have no intent on using the fightstick with every VB game, I really don’t ever intend on messing with some Sega Twinstick like design. Some games recognize both d-pads (ex. Panic Bomber, Vertical Force) and that’s enough for me.