This debate rages on quite a bit on most any gaming forum that allows PC and console fans to intermingle. OCN is no such exception. I decided, therefore, to do a quasi-scientific(In that I used the same game on the same machine to test it ) method to try to figure out which is truly best.
Okay, first of all, testing apparatus:
Machine used: Boot to the Head
Game used: Fallout 3, GTA IV
Game settings used: 1600x1200, FO3 used medium while IV used low. FO3's draw distances maxed, IV's pretty damn low.
Control devices used: $20 HP mouse and $20 HP keyboard bought at walmart, $20 genuine wired 360 pad bought off eBay
Thoughts in Fallout 3: Aiming with the mouse is highly intuitive, despite the FPS elements being subpar(Crouching doesn't reduce your height, for example, and there's no sprint without a mod). This is to be expected since Fallout 3 is, first and foremost, an FPS RPG, and because it's an FPS it just feels right with a mouse. Navigating in-game menus is, as to be expected, pretty easy with the mouse. Point, click, done.
Okay, so onto the controller. Enabling the controller is a piece of cake. Escape --> Options --> Controls --> xBox 360 controller --> on --> Done. Everything's pre-mapped and it takes all of a second to toggle it on or off. Being a GFWL title, Fallout 3 natively supports the 360 controller even on PC, which is why I chose it for this test.
Anyways, on to tying to aim. Free aim is...well it's abysmal. The crosshair takes it's dear sweet time getting anywhere and trying to line up a headshot is near-on impossible for anything that isn't moving. I free-aimed the radroach in Vault 101 out of pure dumb bloody luck, I accidentally bumped right trigger and the BB gun went off.
VATS, however, changes everything. VATS, when using a mouse, feels like some outsider that's desperately trying to get your attention. It doesn't feel like it belongs at all. As a result I only really used it when either A: I needed the DR buff to survive a huge battle where several people were firing at once or B: I needed to point blank someone with a MIRV. Other than that it sat in the corner, once in a while jumping and screaming for attention, only popping up when I miss the space key or the C key.
When playing with the joypad, however, VATS makes sense. It feels like a good friend, like it belongs in game. With the joypad it is free aim that feels out of place. VATS allows someone using joysticks to be able to pull off the same types of fights someone using a mouse can do in free-aim and live to tell the tale, all without dumbing it down for them.
Now, I will put this out there. Some menus, like VATS and inventories, are a bit trickier to navigate with the controller. But that might just be me not being used to it, so take that with a grain of salt. I also want to mention that I used VATS on one of the V101 security officers and the game crashed . Gotta love Gamebryo, eh?
The tl;dr of this half is that Fallout 3, like any FPS out there, will play better with MKB every single time. Bethesda threw VATS in to give joypad users a bit of a helping hand but the game still doesn't feel like it enjoys being played that way.
Now, onto GTA IV.
GTA IV is a different animal entirely. It's a third person shooter, and there is a VERY large emphasis on vehicle driving. As such a gamepad is at least a must-have for the vehicles. However I found myself playing the whole game with it.
Support in GTA IV for the 360 pad is even better than Fallout's. To switch between MKB and pad you simply pick up the new device and start using it. You don't even need to pause the game. It's very handy when, for example, I want to shoot someone while driving. I can drive with one hand(somehow) and shoot with the mouse in my other. All at the same time. This means it's very easy to switch between the two if you want. It also means you can co-op with someone next to you, especially during some of the missions. One of you drives with the joypad, the other shoots with the mouse. It's great fun, I do it all the time with a friend of mine.
That being said, for some odd reason, even shoosting in GTA IV feels natural on the controller. Maybe the game has some sort of auto-aim built into it? Maybe it makes the hitboxes huge? I don't know, but even with the slow aiming of the analog sticks I had no problem with the combat. The combat in IV is functional with the mouse, yes. You can, and I have before, play it using MKB without too much trouble. Yes, the shooting is a bit easier with the mouse. Driving leaves much to be desired and don't even attempt it with a chopper but you can do it.
The tl;dr of this one is that games like GTA seem to play nicely with a joypad. I noticed it in Just Cause 2 and Mafia 2 as well. They're very similar to GTA, over-the-shoulder sandbox games where there's as much driving as shooting.
The basic tl;dr of the whole thing is that in my own personal experience joypads fail at life in FPSs, but if you're playing a GTA-like game don't count them out.