Looks like Valve is adding a actual joystick to the controller taken from the latest client beta:
It's weird the employee would mention the "d-pad" when Valve has been pimping the trackpads for that function.
While I was furiously scanning each room the tour went through for any instance of the number "3", I noticed a Valve employee using what appeared to be a fully-functioning prototype of the analog stick Steam controller. I spoke with one of the machinists working on the project, and he offered me some insight onto how the analog stick came to be.
First up, he admitted that adjusting to the radical dual trackpads of the Steam controller is the biggest problem new users have. While he (and pretty much everyone else at Valve) swear that the dual trackpads are absolutely necessary, and that they really do make all the difference, it's not as easy to convince people who've never used them.
The machinist said that the new prototype's analog stick was tied to movement, in order to "ease new players in" to using the two trackpads, by starting them off using just one for aiming. While he said that the prototype had been successful, and that players were eventually able to transition to the dual trackpad layout, its big disadvantage that the controller's d-pad had to be cut to make room for the stick.
When I asked if an analog stick would make the final cut, he told me he wasn't sure, and said that the controller has been through a whole bunch of revisions already, and will probably have quite a few more before its release.
also this was found in the latest steam beta build