Controller impressions after a few hours of use:
The trackpad is in no way accurate enough to replace or compete with a mouse in competitive play as far as I can tell. This is just my impression of the thing after a few hours of use so YMMV. The best thing about the controller surprisingly is the analogue stick. This is the first time I have liked a convex stick. Feels like a Dualshock 2/3 with higher quality rubber. The texture around the edge is a very nice touch. The triggers are a bit of a let down. Was excited to hear that Valve were trying dual stage triggers. But the analogue stage is far too shallow. Maybe I am just used to the way the GC triggers felt but I was expecting a longer trigger stage. The bumpers feel a bit meh too, very little travel in them. Considering the weird shape of the thing it is unusually comfortable. Doesn't quite fit into the hand like a Wii U Pro controller, but comfy nonetheless.
As far as specific game impressions go:
Witcher 3 - immediately feels better with a Steam controller than either a KB&M or a 360 controller.
CS:GO - trackpad is much more accurate than a gamepad, but still leagues behind a mouse. The controller wobbles a bit when clicking in the right trigger to fire causing the position of your finger on the trackpad to wobble which interferes with pinpoint aiming. This might be fixable with an increased deadzone, but that would probably sacrifice accuracy.
Axiom Verge - despite the lack of a real d-pad this game feels good on the controller. Weapon switching with the trackpad can be a bit fiddly, but it was fiddly with a stick too.
RE4 - The default binding work like the 360 controller, but I spent some time trying to make the controller feel more like the setup they had with the Wii version, which I think still controls the best out of any of them. Hadn't much luck, but the range of configuration options is incredibly impressive. I have no doubt someone will make a great binding set for this game.
Ultra Street Fighter IV - indistinguishable from a 360 controller.
Arkham Knight - Works well with the "Gamepad + High Precision Camera" template. Feels alot better than using either a KB&M or a 360 controller. When using this mode however the button prompts flip between KB&M and gamepad buttons which is quite distracting. Would be relatively simple to fix this with native Steam controller support though.
Ground Zeroes - Can't mix Gamepad and KB&M bindings so you're stuck with emulating the right stick with the right trackpad. This works, but isn't ideal. This is Ground Zeroes' fault for not allowing multiple simultaneous input methods, so not an inherent controller problem.
Terraria - bit of a mess to play on the Steam controller, but the control scheme on KB&M isn't great either.
I don't know of any games that implement native Steam controller support yet (does anyone on GAF know of any?) so all the games tested are using the legacy mode. I have no doubt that when games start using the full controller API that a lot of the software problems of the controller will disappear.
TL;DR - I like the controller and it has lots of potential, but it has some rough edges. Triggers could've been better. I guess they can look at them for Steam Controller v2.