+1 you need the Midway gromett. It's softer than the Wico too.
Ms. Pac-Man, Burgertime, Pac-Man, Wizard of Wor and many others.
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While you're at it, buy a new sleeve, yours is severly worn and it acts as an actuator at the top of the joystick against the metal diamond shape on the base.
Midway Joystick Handle Red Sleeve, aka Stop Spacer. Reference Midway P/N: 0921-00100-0000. Baby Pac-ManBlueprintBosconianBud TapperBump'n JumpBurgertimeDomino ManGalaga 3GaplusGorf cocktailJr. Pac-ManJump ShotJourneyLazarianMs. Pac-ManPac-ManPac-Man PlusRally-XRoot Beer TapperS
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I had one that was rust welded like yours. Used everything including Sea Foam penetrant. Would not budge. Finally, I just cut into the rubber part of the grommet to tear it out like you did. Then I had to cut it off the metal part that was fused to the shaft with a Dremel. PITA and after all that, the joystick was bent to begin with! Ended up using tools to straighten it out, so all is good but, man!
Glad you got it off! (And buy that sleeve!)
Del