Can confirm, just got the same problem when playing R6S. Without hardware input enabled, the game would play fine, but whenever I tried to input text into the chat, it would appear at a snail's pace at like one character per second. It was quite frustrating.

When I enabled hardware input, I could aim fine with the mouse.. I could move around with the keyboard just fine (except for the chat thing), but when I tried to use the mouse and keyboard at the same time the game turned into a crazy slideshow.

After getting rid of active processes one at a time, my problems ceased when I stopped Recursion. So I'll have to start it manually when I start PS2 and stop it when I'm done I suppose. The teeny tiny inconvenience is obviously far outweighed by all of the benefits I get from running Recursion, but all the same it would be nice if there could be a way to fix it.

Maybe I can work some scripting magic to make Recursion automatically start with the PS2 launcher and then wait until both the launcher and game executable are terminated. I'm not clever or experienced with these things, but it's worth a try.