That one is tricky to configure. The easiest thing I found to do (and you only have to do this once) is to setup Armor Alley initially with mouse input, start a new game, and then go to Special -> Controls to get all the bindings the way you want them. After that, reconfigure it to use joystick input and you should be good.

Here are more detailed instructions if you need them:
- If you already configured Armor Alley, in it's root directory and delete the configuration file "ARMOR.CFG" (after backup it up of course if you want to).
- Start Armor Alley and it should prompt you for configuration settings. Be sure to choose "(3) Mouse" when prompted for the input device.
- When you get into the game, go ahead a start a new game. The mouse calibration isn't working properly, but you should be drag your pen around until it lands on the proper place and then do a quick tap to emulate a button push.
- Once you start a new game, the "Controls" menu item under "Special" should become enabled. Go ahead and click that one to get into your key mapping preferences into place. Keep in mind when you map keys here, you also consider what keys you have mapped to your sixaxis controller if you plan on using that later.
- Save everything and quit when you are done with configuration. The easiest/quickest way I've found to quick is hitting the n900 lock button menu up and choosing "End current task"
- Go back and delete your ARMOR.CFG file again (note that there's a new PREFS.RES binary file now which holds your Armor Alley key mappings).
- Start up the game again, but when configuring it this time, choose Joystick as the input device. You'll do some calibration and such, but after you are in the game this time, you should be good to go. Feel free to delete your ARMOR.CFG file as often as you like to play with various configuration settings.

Hope this helped!