Was using a PS4 controller on macOS Sierra, and while it is capable of switching between keyboard and controller on the fly as inputs are detected, if the PS4 controller is ever unplugged and plugged back in, no more inputs will be detected on it until the game is fully turned off and on again. Not sure if this happens on other machines/controllers
Yikes, thank you for figuring this one out! That's brutal! Will definitely look into this. Appreciate you reporting all these :)