I'm using v2.50 Build 24 on OS X 10.8.5 with an HP Elite v2 keyboard. I'm having this problem in all quests, as well as the quest selection screen of Zelda Classic.
Basically I cannot use any directional controls other than 'down'. At the quest selection screen, I am only able to move the cursor downwards. When I try to play a quest, Link immediately walks north until he eventually gets stuck on a solid object, and the only thing I am able to do the entire time is open up the menu. I have tried binding the directions to different keys but the problem persists, so it seems that it is a software issue with Zelda Classic and not a matter of hardware incompatibility. All keys seem to be working fine in ZQuest Editor.
Is this a known issue, and if so does anybody know of a solution? Any help is much appreciated.