SUMMARY
When using new settings for game controllers "Allow using as pointer and keyboard" makes controller work as mouse+keyboard when in opening games through Steam and using Steam Input. 

STEPS TO REPRODUCE
1. Enable "Allow using as pointer and keyboard" in Game controller settings
2. Open game on steam (Make sure to enable steam input for controller)

OBSERVED RESULT
Controller is not detected and works as M+K. Sometimes works as both.

EXPECTED RESULT
Controller works as expected using Steam Input settings.

SOFTWARE/OS VERSIONS
Operating System: Arch Linux 
KDE Plasma Version: 6.5.91
KDE Frameworks Version: 6.22.0
Qt Version: 6.11.0
Kernel Version: 6.18.9-3-cachyos (64-bit)
Graphics Platform: Wayland

ADDITIONAL INFORMATION
I generated basic SDL example program for testing - https://github.com/nairaner/gamepad-plasma6-6
I tested a few scenarios:
- Just run - Works
- Add as non-steam game:
    - With enabled Steam Input - Fails - Controller doesn't generate input (sometimes does, but also works as M+K) 
    - With disabled Steam Input - Works

I assume steam captures raw input data in some way that happens to be undetected by KDE.