Thank you for helping me, RAT. Much appreciated! Unfortunately, I still couldn’t get this working, so eventually I let it be and worked on some other parts of the game for a while.
However, after a fresh look today I finally found a silly bug in a place I hadn’t been looking: in my player controller I pass the various input actions to the currently possessed pawn - or so I thought. I was actually always passing the input actions to the pawn of player at index 0.
So, the logic for creating local players, spawning pawns and assigning input mapping to the correct player controller was working fine all along. It was the actual input actions that was sent to the wrong pawn.
Controls for split screen players (on both listen server and clients) now work as long as local player 0 always have keyboard controls. Assigning gamepad to player 1 and keyboard to player 2 is still not working. So my initial issues appears to be a combo of two separate bugs. But, always assigning keyboard to player 0 is fine for now. I’ll consider this solved for now. 