I'm not wondering if it would be better for console joysticks. I'm thinking about a replacement for wasd. With wasd, you only get 1 and 0. With the console joystick, you get 1, 0 and decimal points. So, what would it be like if you merged the two, making it so you more or less operate the console joystick like you would wasd (through, basically, an enlargement of the console joystick)?

Maybe this kind of controller would also be better than touch-pads, which aren't really that great.

If there's a shortage of bind-buttons, someone can always add foot-pedals.

You want to enlarge whole analog pad so it would become a typical old computer analog joystick like those we all used 20 years ago? or do you want to enlarge its field of move? Either way it hurts response time, especialy when switching between extremes. Keyboard buttons simply are most responsive.
You can also buy keyboard with analog buttons, but if we look at analog buttons on console pads it isnt always the best idea.

We've never really seen only being able to move in 8 directions limiting though. When was the last time you were playing and thought to yourself: "Gee, I really wish I had a joystick in my left hand right now!"

Keyboards need more thumb buttons... WASD is limiting, use ESDF or ASDF touch typing(Which grants the most IMHO, plus you can use more buttons at once(keyboards are limited to like four keys at once, but using asdf gets more for some reason))

A=Back
S=Forward
D=Strafe Left
F=Strafe Right

As for the current style of controllers(and a mouse), they might be ok for limited hotkey games, such as Quake. But when you add countless weapons/attacks like World of WarCraft, you'll get so badly defeated it isn't funny.

I think the ideal would be a thumbstick for your left hand complete with enough adjacent keys to bind. The problem is making something that is simple, functional and ergonmic that fits those criteria.