So you assigned the morph stone to a button that worked fine for something else, and/or tried using it from the inventory, and the same thing happened? That would seem to rule out a faulty controller button, anyway.
Maybe try replacing/recharging the batteries (even though you should get plenty of warning before they run out). When the batteries for my DVR remote get low there are certain functions that seem to be effected more than others. Even if this were the case with the controller I'm not sure how a feature that can be remapped would cause an issue, but it is easy enough to try full batteries.
Try emailing supportintl@dtp-entertainment.com or support@larian.com. Maybe they've had similar reports before...
