Mine used to work, but now only the paddles on my wheel work (I usually have the controller set to Controller 1 as well as the wheel as it is easier to navigate the menus with and you can still race with the wheel)
I just unplug my wheel when I spend a lot of time doing a lot of menu stuff. But yes, it's annoying. Funny thing is, it used to work before 1.02. Before 1.02 the L1/R1 on the controller worked, but the paddles on the wheel didn't. Now I guess PD "fixed" it so that the paddles work, but somehow messed up the controller. I don't understand why it's so hard to make them both work at the same time.