For its time the DC controller was okay, but it had some quirks. This was still relatively early for analogue controllers and not well refined. It was basically an evolution of the Saturn analogue controller with the addition of the VMU. Being critical because it doesn't have a second analogue stick is silly as they were not widely used at that time. Sony had released an update to the PS1 controller with dual analogue sticks in 97 but the Dreamcast was in development earlier than that for launch in Japan in 98. Had the Dremacast been around longer, it's possible we may have had a revision to the controller with dual analogue sticks.
The keyboard and mouse combo for FPS is the way to go as it has been tried and tested on PC.
While I could hold it or extended periods, having it narrow towards the base was not really comfortable on the wrists. The hard, convex analogue thumb stick could often be slippy despite the texture, and I never liked the d-pad. It was a disappointment coming from the excellent Saturn d-pad. The button layout and triggers were good though.
Years of refinement have seen many improvements to controller ergonomics with the wireless Xbox 360 controller being my personal favourite.