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Xbox games launch as desktop apps: gamepads use mouse+keyboard emulation
A recent update to Xbox Game Pass introduced an invisible launcher (GameLaunchHelper.exe, I think) which breaks gamepad support when launched from Steam.
Possibly we could solve this by launching our own application that launches the game (with explorer.exe) and watches for the game to exit. I think UWPHook does something like that for Steam Link streaming support. I haven't tried it recently and who knows how they'll break that next?
Workaround
Switch Desktop Layout to use Gamepad.
- Steam > Settings > Controller > Desktop Layout > Edit
- Click "Official Layout"
- Click "Templates"
- Click Template Gamepad
This setting means if you have any desktop apps, you won't get mouse emulation on gamepad unless you set them up as a Steam shortcut with Steam Input using the normal Desktop Configuration layout.