[Neavorce]

You can controll any players with mouse. Just turn on the "Steer with mouse" function and test is.
I'm not using any mods. I do not know this was reported.

[CaHbKo]

Confirmed. Also it doesn't really let you control anyone, it's just that steering of other cars that have players in them is gonna be the same as yours.

[Universal]

Wow, this is really a big bug.

[MP2]

It has no effect on their screen - you aren't controlling them at all.