Sorry, I do not catch what you have done. In the Windows XP Mode window, the only USB peripherals I see with the USB Button are the printer and the camera. I never succeed to get the game controller, which is correctly installed under Windows 7.
Go to the Windows 7 Action Centre, and launch the Windows Program Compatibility Troubleshooter. This will check if the program is compatible with Win7, and will automatically pick the right settings to get it working.