I'm using a combination of keyboard/mouse for walkin' and shootin' and a 360 controller for driving and ambling. Works nicely, as the game changes between them seamlessly.
Just an update on the 185.20 drivers-
Installed them and played about with GTA4's autoconfigure, which put me in a terrible res due to my low vram. There was still loads of stuttering and crashing.
Thought i'd try -availablevidmem 3.0 (!) to see what effect it would have. Put the settings where I wanted them, game ran fine for 30sec at 30fps ish then total freeze. So, I took how much I was using (about 480/860 or something like that) and calculated what i'd set the command to so i could get it exactly matching up with my chosen settings. Turned out to be -availablevidmem 1.44. Having played this for 20min, all of the major stuttering has disappeared, and i'm able to game around 25-30 fps on my desired settings.
My conclusion, make sure you've got GTA to use as close as possible to your amount of VRAM, as it appears to directly affect the stuttering issue. Perhaps this is a bug relating to how it moves the textures about etc, I don't know for sure.
The new drivers may have given me an extra 1fps but nothing worth writing home about.