I checked over at XDA developers to see if anyone else was having issues with the iPega d-pad in retroarch. A couple of others are, and one person suggests that it was previously working before they upgraded to Android 4.2.2. I also tried the iPega in a few more modes. The dpad works once and only once in iCade or keyboard mode - retroarch responds to a single dpad input, then no longer responds at all.
If both up on the joystick and up on the dpad are mapped as DPAD_UP, is there any way to configure retroarch to listen for inputs from both? Currently only inputs from the joystick actually get executed in a game (although both work in the retroarch settings menu).