Koala pad
I can't speak about the C64 version of the Koala Pad, but I do know a bit
about the Atari version. I think they're essentially the same. The Atari
pad emulated two paddle controllers, one for the 'x' direction and one for
'y'. The problem is, the things only have about 220 pixel resolution. You'd
have to make it draw relative to the current position. Perhaps treat it as
a scrolling window on the screen.