For those who encounter the same problem I did find a bit of a workaround. I set the keybind for "switch to client machine" as "Left Win + B + /". Win + B is the shortcut for "Focus on System Tray" so when you switch to the client machine the taskbar pops up on the director machine which stops control of character in games. Can be Left Win or Right Win doesn't matter. Also the third character does not have to be "/" it can be any random key as long as Win + B is pressed first. Just "Win + B" as a keybind doesn't focus on system tray but instead brings up the task bar and start menu (as if you're just pressing windows key) which does also work but for my purposes I preferred it to just be the taskbar.
I love the functionality of this program it's what allows me to do stuff like this. I've used other virtual switches and they don't compare!
Would still like to figure out why my cursor is being hidden on the director machine though!