I think you're right that plot is probably easier to work with than viscircles, and your circle function appears to work as-is.
The main thing to fix in your code is the definition of the function fig_kpfcn, which had been adapted from the other answer. That answer was about moving a figure by setting its 'Position' property, and the analogous thing for a line object (such as the plotted circle here) would be to set its 'XData' and 'YData' properties. See my adapted fig_kpfcn below.
In particular, note that fig_kpfn has two input arguments: H - the figure, and E - the so-called "event data" (both of which appeared in the other answer but disappeared in your code).
Without seeing exactly how the code you've shared fits in with the rest of the GUI, I can't say for sure you could copy and paste this code into yours and have it work without modification, but maybe seeing fig_kpfcn here is sufficient for you to see what you need to do in your code to get it to work.
xCenter = 330;
yCenter = 255;
radius = 16;
S.ship = circle(xCenter, yCenter, radius);
set(gcf(), 'KeyPressFcn', @fig_kpfcn);
guidata(S.ship,S);
function [] = fig_kpfcn(H,E)
% Figure (and pushbutton) keypressfcn
S = guidata(H);
switch E.Key
case 'rightarrow'
set(S.ship,'XData',get(S.ship,'XData')+5);
case 'leftarrow'
set(S.ship,'XData',get(S.ship,'XData')-5);
case 'uparrow'
set(S.ship,'YData',get(S.ship,'YData')+5);
case 'downarrow'
set(S.ship,'YData',get(S.ship,'YData')-5);
end
end
function h = circle(xCenter,yCenter,radius)
hold on
th = 0:pi/50:2*pi;
xunit = radius * cos(th) + xCenter;
yunit = radius * sin(th) + yCenter;
h = plot(xunit, yunit);
hold off
end
