I think your on to the problem. You did get a change, even worse, you might find your problem in this PS2 connector. Make sure your pins are straight and the handle is well seated and snug. To be on the safe side, unplug the USB when taking the handle off and on.
If this isn't working, do a quick cable check to make sure you don't have any signs of a kinked cable that might have a broken wire. Next you may have to open up the handle and take a look in there for any pinched or loose wires. Look close at the base and the PS2 connector. Take care when putting it together that you don't pinch any wires when you put it together. Since all the buttons are failing, I bet it's a bad connection someplace.
Gunner