Finally got around to messing with this.
I used a batch file consisting of the exe and command line you already have entered and got the same results.
It launches the game, but the controls still register in Mala so it tries to launch the game again.
I'm pretty sure the crux of the issue is that Mala doesn't realize that SSFIV.exe is the program it should wait on to exit before retaking focus.
In my case Mala considers the batch file the game. So after the batch file exits, Mala thinks it should retake control even though SSFIV is still running.
I added pause to the end which keeps the batch file from exiting until it receives keyboard input.
Since I'm using hacked xbox360 pads, it allows me to play the game. The controls don't do anything in Mala until the batch file has exited.
When I manually navigate the menus and exit the game, the batch file window is still open and the controls don't work in Mala.
My exit button is still wired to a keyboard encoder (ESC), so when I press that the batch file exits and the controls work in Mala again.
I tried using an autohotkey script that would keep running until it detected that the SSFIV window was no longer open, but it didn't work.
There is something here I'm missing. I launch other games via command line or autohotkey script and haven't had any problems with the controls still working in Mala on those. Tired of thinking about it for now. Pretty sure a complicated autohotkey or VBS script(which I don't know how to do) would work, but there should be a simpler solution based on how Mala determines what exe to wait for.
EDIT: Pacman Championship edition also does this, but I have Mala pointed at a shortcut that points to the game exe, same as every other steam game. Don't have this issue with the half dozen other games though.