I definitely thought it was better with the M&K. Smoother gliding controls (though I didn't give the pad much of a chance there), much faster camera movement, more precise aiming. And lots of hotkeys, as opposed to the gamepad's annoying button combinations.
The only real advantage the gamepad has is more precise movement, which isn't important for 99% of the game.
The sole purpose of this space is to make my post look longer.
I played with M&K. Having quick and precise camera turning came in very useful during the extreme combat challenges. And in the case of Arkham City, quick access to my 12 gadgets proved crucial - doing that on a gamepad with far fewer buttons has got to be more cumbersome in the long run.
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Much like with dark souls, i played the arkham franchise with K&M and enjoyed it a lot, and when i played it with a controller it didn't feel as smooth. Play with whatever you feel comfortable, as long as you you will be fine playing with anything.
I tried with a controller... didn't like it. The keyboard/mouse setup offers you hotkeys and easy access to some of your items. I enjoyed way more playing this game with kb/m than the controller. I usually prefer playing my games with kb/m though, so there's that.
People that are saying that you should only play this game with the controller probably just didn't played well with the kb/ and assumed that everyone would share their same disability or, they are talking crap and didn't even try.
Give it a shot anyway. It's very playable and maybe, even better if you prefer this setup.