The problem is either with the Grind version or with just a particular release. I have two versions of the game: JSR (European) and JGR. JSR runs perfectly, the large sprays can be done with both a gamepad and a keyboard, while they don't work properly in JGR. However, I found that the problem only exists with the 'up' and 'down' arrows; all the others work fine. While this makes the story mode impossible to complete (since Beat's large spray starts with 'down'), the other game modes (and the missions where you can choose your character) are perfectly playable, as long as the character you choose doesn't have these moves in their large sprays.
So if you have the same version as I do, all you need to do is grab some saves (GameFAQs has some) to be able to play the game to some extent... or get another version.