No, you do not have to (and should not) configure anything for diagonal movement.
Even real Amiga joysticks do not actually have diagonal input. Moving the joystick to the top right simply triggers the internal up and right switches at (about) the same time.
Similarly, when you use the keyboard cursor keys to emulate an Amiga joystick, you get directional movement by pressing two cursor keys at (about) the same time.
As for the game itself, I'm not familiar with it. For all I know, the game does not even support/use diagonal movement
(Perhaps look for an online manual or ask in the game support forum instead).