First I'll explain how rally is working for me using the gamepad: First order and drop a few units on the map, next hover over them and use gamepad B to select them, as you select them you will see white outlines surround each unit that is selected, then move mech to rally point, during this time (with units selected) the command menu will be visible, dpad left will issue the rally command where your mech is.
Now with that out of the way I'll try to explain the observed bug that prevents rally from working. When the bug occurs the command menu is visible but he dpad does not issue commands. Instead the dpad acts on the unit bar at the bottom of the screen. During the time of the bug unit selection is also active and you see the units are still selected as well.
How to work around the problem: If you pickup and drop a unit you will reset the unit selection and this will allow you to try to select and issue commands again.
How to reproduce the problem: After selecting the units with B move away and press B again. At this point you notice the dpad does not issue commands.