I have to admit, Unreal is one of the few areas where it actually works, mostly because the game is built so that a player with a controller can go toe-to-toe with PC players. It's a game with uniform speed, no recoil and no reloading; I play with PC players all the time and always hold my own and have come #1 in many games.
But you're right - in virtually any other FPS, KB&M players would have a gross advantage over their peers using controllers and it would be a mess to sort it out in any kind of coherent online community.
However, I will always maintain that this desperately needs to happen in RTS games ported to consoles. Asking me to play Red Alert 3 with a controller is like showing a cartoon of Mohammed to a Muslim. Ok, maybe not quite that inconsiderate (understatement of the year), but the point is it offends values I hold to be important to me. There's simply no other way to play these games. If people can buy plastic peripherals to play music games effectively, there's no reason the same can't be done for RTS. It may be a niche hobby/sport, but I know many people who would love to enjoy these games on a big screen TV with surround sound in the comfort of their living room couch, myself included.
And I've diverted from the topic of inverted/non-inverted looking in control schemes, sorry!