Yes, if split screen isn't forced, it is a bug if it doesn't switch back if the characters move close together. Does walking away and back again get it working, or making sure any companion characters are close, as well, etc?
If the keyboard is handy the (default) Delete and End hotkeys still rotate the camera in controller mode (and Page Up/Down and Home to zoom and recenter), but otherwise only player 1 can control the camera.
