I've had this happen with my Valheim build and my Windows 7 desktop. For many updates, my controller registered and I was off and running...

Then, not certain if a single update did this or if it's my unsupported OS...?? But my controller stopped registering in Valheim. I had to unplug it, then replug it and it once again registered and I can use the device. It got so annoying, to have to move to the USB port and do the magic; I bought a small USB hub w/switches and plugged my Xbox clone controller into it and now I just reach up and turn the controller off/on, then I once again get it registered.

I use a hybrid system; KB for hotkeys, and my Xbox controller to move....works great!

Good luck!