"Enable Steam Input for XBox Controllers" should also be enabled.

Enable Steam Input for Xbox controllers is enabled, tested just now also to disable it and connect an Xbox controller via Bluetooth, didn't make a difference. I set it back to enabled.

Okay then, OP, have you tried to turn off the Bluetooth and then turn it on? this has solved quite a few problems with BT in the past. You can also see if the driver needs an update as you must manually install the BT driver but I have not seen one update since 2022.

You should run DISM and, especially, SFC.

And of course, the Bluetooth Extended Troubleshooter might pick something up.

You have to properly sync it first. You can't just turn it on and expect it to connect automatically.

First before you do anything connect the controller to PC via USB data sync cable and update the Controller Firmware

Drivers were manually installed from ASUS' site, yes.
I did completely remove the dongle and put it in a different USB port, also turned it off and on again, no difference in Steam.

Bluetooth troubleshooter only brings up the fact that the Intel Wireless Bluetooth device is disabled, but that's because I disabled it on purpose as the BT device on the motherboard was lagging and constantly disconnecting. Out of curiosity, I let the troubleshooter to install that device again and disable the dongle just to check if Steam would recognize were it connected from the other BT device, but there was no difference in Steam. I switched back to the dongle.

But there are no issues with Bluetooth connectivity itself when using the dongle, considering the Xbox controller works outside Steam, and Steam Controller works within Steam.

引用自 Bad 💀 Motha：

You have to properly sync it first. You can't just turn it on and expect it to connect automatically.

First before you do anything connect the controller to PC via USB data sync cable and update the Controller Firmware

You didn't read beyond the thread title, did you?

Why ASUS website.

Just Google Microsoft Download Catalog and get from there.

If Steam don't detect them via BT it could maybe not get along with your particular BT chipset

Steam confliction with ASUS USB-BT500 dongle.

Be keen as some people are reporting that reinstalling the dongle firmware may fix this issue but another says that by doing so, the dongle is no longer working properly nor reinstalling.

I managed to fix it.
Considering that Steam Controller works with the same BT dongle, I ruled out that issue is with the dongle and searched elsewhere. I checked in C:\Program Files (x86)\Steam\logs\controller.txt and noticed that whenever I connected my Xbox controller, it would write this line: Hiding blacklisted Device 45e/b13

A search on the internet revealed that this would mean the device was hidden, if I were to connect the controller over USB cable, it would get the hex of 45e/b12 (as shown inside virtualgamepadinfo.txt file) and therefore it worked. I'm guessing 45e/b13 is the hex assigned to a certain batch of Series X controllers when connecting over Bluetooth (or perhaps all of them), which means both of my controllers would remain blacklisted.

Sadly I have no idea why the Xbox controller was marked as hidden, considering that Steam seemingly does not seem to have that feature for over 2 years now. If you can't hide a controller from Steam menu, you can also not unhide it.

Solution was to open C:\Program Files (x86)\Steam\config\config.vdf, search for "controller_blacklist" and remove the values in quotes, so it looks something like this: "controller_blacklist" ""
Need to keep the empty quotes.
Saved the file, restarted Steam, connected Xbox controller and it was detected without issues.

This why it's a good idea to do a Steam Repair every few months where you delete all tbat built up junk like the config folder and such.

There's no Steam Repair button for the Steam client, only for the library (just games). To "reset" the config folder, you'd need to manually delete it, but then it's probably better to do uninstall and reinstall. I would have done that as a last resort and it would've also solved the issue.

If you were to run the Steam Installation media over the current Steam Client, that would replace all client files except the games which would remain intact.

引用自 Alice Liddell：

If you were to run the Steam Installation media over the current Steam Client, that would replace all client files except the games which would remain intact.

steam does this every time its launched

just make sure steam is set to run as administrator so it can correctly install drivers and redists when it needs to

and its also required for steam to pass controller inputs mapped to k/m to interact with windows desktop