I've had a look at CXBX and was able to replicate everything Toasty was saying. So after a lot of testing and coding things, I found I was able to make a small one line change to the DemulShooter code and it allows the Vive controller via Virtual Desktop to work.
I've attached the compiled exe's (standard and x64) and a txt file with the code change.
When running the exe it needs to be done from the command line like this:
demulshooter -target=chihiro -rom=vcop3 -usesinglemouse
i.e. must have -usesinglemouse. I only tested vcop3 but it should work for all games though and other platforms.
I tested it on a newly unzipped DemulShooter (latest version) and I found out that you must run the DemulShooter_GUI.exe first and choose a device for P1. I also don't know for sure that added P2,P3,P4 etc will have any effect.
It seems you need to choose a hardware mouse for P1 or the mouse clicks don't work, the crosshair still moves around though. I think this should also work for other programs that fake the mouse movement and clicks. For instance I think this may work for certain Wiimote guns programs etc.
By the way, thanks for that reply ThatOneSeong. It was enlightening. I think choices like this get made earlier on in making a program and then get harder and harder to fix later on. So it just becomes the way it is.
Edit 1: I should mention specifically that the DemulShooter version that it needs to overwrite the exe's is version v12.2
https://github.com/argonlefou/DemulShooter/releases/tag/v12.2