The first mode sheet is only going out to the USB channel and that is running in XBox 360 mode, which has no keyboard outputs.
Try changing cell C3 from USB to "both". The bluetooth module will ignore the game controller outputs and the USB channel will ignore the keyboard.
Alternatively, you could run the quadstick in mode 0 or 4, or 6, and use VGEmBus and QMP to produce a virtual XBox controller.