I would absolutely not want it to work as a controller outside Steam. In initial mode, aka lizard mode, it works as a keyboard and mouse because they want it to be able to boot your OS. That way you can even use it to manage your UEFI settings. Even in bluetooth mode, the og. SC works initially as a mouse. It’s designed for HTPCs after all.
It looks like a read error, so could be anything related to it. Permissions don’t seem too likely, but possible. Could be a character in the path that some windows compontent doesn’t like, or too long path.
You could try to see if moving Proton and the prefix of the game from one drive to another helps, but it just a wild guess, and comes with a risk of breaking other games. So if you are uncertain how to do it, I wouldn’t recommend trying.
Sorry I couldn’t help more.
Yes, I have had wierd issues with Steam and external libraries. Mostly because of permissions and non-acsii characters in the path, but some have been unresolved. Steam is really complicated piece of software. The host OS, Steam linux runtimes and Proton all do their part. Flatpak can resolve and cause issues. That being said, external libraries are well tested on the Deck, and should work fine.
First step with troubleshooting would be logs. Check the Steam troubleshooting page on Arch wiki, and Proton Readme on Valve’s github to get you started. You’ll need to add PROTON_LOG=1 to launch options to get a log out of Proton. Also issue trackers for Proton and the linux Steam client are valuable resources.
I hope you get it solved.
I didn’t find anything on Valve’s issue tracker with a quick search, but maybe you’d like to investigate deeper.
https://github.com/ValveSoftware/steam-for-linux/issues?q=is%3Aissue+state%3Aopen
You could take a look at game’s logs. For Windows titles, enable logs in Proton by adding PROTON_LOG=1 to launch properties, see README for details.
https://github.com/ValveSoftware/Proton/blob/proton_11.0/README.md#runtime-config-options