I figured it out. Once again I was overcomplicating things. All I had to do was:
This for the Keyboard
+ MouseKeyboard: Key Right arrow is down
Sub-Event = + MouseKeyboard: Key Down arrow is down
Action to Sub-event = -> Sprite: Move 10*TimeDelta pixels at 45 degrees
Action to Sub-event = -> Sprite: Set animation to "45 Down Right"
And this for XBOX 360 Controller
+ Xbox360Controller: (1): Left Thumb - Right is down
Sub-Event = + Xbox360Controller: (1): Left Thumb - Down is down
Action to Sub-event = -> Sprite: Move 10*TimeDelta pixels at 45 degrees
Action to Sub-event = -> Sprite: Set animation to "45 Down Right"
And I just change the angle of degrees to match which of the 8 directions I want, and then connect the key presses to an animation I've set in the Animator interface. Works perfectly!