Was this game meant to be played with a controller or a mouse? It seems odd to have to switch between mouse and keyboard when using the pause menus.

I'm pretty sure if was meant to be played with keyboard and mouse, but yes, it is odd that the menus are keyboard-only. I thought the mouse aiming worked well, though.

There are "joystick" options in the control options, but I doubt they work very well; back then there weren't many gamepad-type controllers for PC games, and the ones that did exist didn't function the way they do today (in terms of how they communicated to the computer). I doubt Outcast would recognize a controller if you plugged one in, but if you have software to map keyboard and mouse commands to your controller you could probably make it work.