It reportedly worked outside of Steam, but only as a basic gaming controller and separate keyboard/mouse devices. This is unsurprising, since there isn't really a standard interface for a device like the Steam Controller.

Exposing it as a coherent device via SDL makes sense.

No, but it doesn't work as a controller outside of steam, because it's what makes sense. Every time someone complains about this I feel like they're completely missing the point of the controller.

Does your BIOS know how to handle a controller? Most don't, but can handle a mouse and some specific keys. How are you expected to change your BIOS settings with a controller unless it can act as a mouse+KB?. Or even without going into BIOS imagine something corrupts Steam and now you need to reinstall it, or do some other OS fixes, can you do that with a controller? Probably not. The steam controller allows you to plug your PC behind your TV and not having to get a KB+Mouse to use it in the vast majority of cases.

Those are just a few examples, but at the end of the day the difference is that most controllers are meant to be used to play controller games, the Steam Controller is meant to be used to control your PC a part of which is playing controller games, but also a lot of other things were never intended to be used with a controller. Therefore it needs to be able to emulate KB+Mouse by default because with a KB+Mouse you're likely to be able to go from most states into having Steam to launch a game, whereas a controller is useless to navigate your OS or BIOS.

As far as I understand the stream controller had functionality that was not supported by the normal input drivers.