Most of these problems are fixable, or at least have workarounds.
While this seems helpful, it's unfortunately caused several other problems: lightsaber hilt texture mods don't function with the new version, some effects like fog have been removed, save games are sometimes lost temporarily, it can cause or exacerbate issues with in-game dialogue skipping, and rarely users experience extreme and irreparable stuttering and screen tear. Recently KOTOR 2 received an update on Steam which added native controller and widescreen support. KOTOR 2 Spoiler-Free Build IMPORTANT - STEAM VERSION NOTES & FIXES IMPORTANT - FINAL INSTALLATION INSTRUCTIONS.Widescreen Bugfixes & Extended Support Mods.