For whatever reason when I'm playing with a 360 pad I'll find that the mouse controls will still be active and they will interfere with the game.

The most obvious example is that button prompts flick between button mouse and 360 pad. Whats worse is that the camera is messed up as it regularly resets itself when moving around, which makes moving around enviroments horrible. I've tried the ingame options and making sure its set to controller but the mouse controls still work.

Anybody know why my mouse is still active in game, when it should be controller only?

Try to grab your mouse and turn it upside down, so the optical thingy shines on the ceiling. I am not kidding, if your mouse is sensitive enough, it might get activated by minor tremors or such, and while the game should ignore those, well... It seems that it doesn't.