Connect IQ Simulator Buttons not working?

Not all app types support button input.  You must have a delegate for the view to see input, and then you'll only see what you look for..  Try using the input sample in the SDK. On the device you have pictured, the lower left button is onBack, the right on, onMenu.  The upper right, KEY_START or KEY_ENTER (I forget which). The upper left button, you won't see

It has been awhile since I've done much with the original va in the sim.  In the event there is something odd with the sim, try a different target device.