Do have have the loader set to "Install Mods"? (It should display as "Uninstall Mods" if you do)

Also for GC controller you're gonna wanna use XInput Fix 1.0 for GC Controller which is located in the Resources tab.

And yeah, the camera will have a third-person view on Sonic when idle. I personally don't know what causes it except that it's to do with the mod loader.