I was JUST coming back here to post an update...
so, after giving it a few days and poking around on the web I determined that the iCade Jr. Buttons that show up as "joystick button 1 joystick button 2 joystick button 3 joystick button 4" etc. in the in-MAME button assignment menu (ie the two RIGHT-MOST buttons on the control panel) DO in fact allow for motion in all directions with a simultaneous button press.
I SWEAR I had tried that initially with no success, but I guess I did not.
So, the maximum number of buttons that you're going to get away with on the front panel of the iCade Jr. is TWO if you need simultaneous character movement with the buttons.
Not a total bust after all, and most of the games I want to play on this thing only have 1 or 2 buttons anyway.
If you have one of these just assign Button 1 and Button 2 in MAME to the top right and bottom right button. You can assign coin/start to the left buttons or the buttons on the back.