Okay so hi guys!

I've installed PsychoPad, messed around with XPadder, but anytime steam is running, the game doesn't recognize my controller AT ALL.
It only works if steam is turned off, but in that case it just reverts to the default steam controller config, so i cant change or use most of the buttons!

Anybody know what I can do?

Are you running it as a shortcut through Steam?

Yeah, I tried running both through Steam, with and without Big Picture Mode
Still every time Psychonauts launches, controller just isn't recognized.

Very odd. Just tried it myself, and it works fine. I'd ask what operating system you're using, but I'm not sure what difference that might make. Especially if the controller is working in other games.