@crush ... Ok testing complete. The powered hub will work with or without the adapter pulling power from the adapter if present.
--> Shutdown Pi.
--> Add USB hub *unpowered.
--> Add USB audio.
--> Bring back up.
Result: Same odd behavior with the controller etc. on different newer hub.
--> Plug in power adapter to USB hub.
--> Turn on.
Result: Everything works as expected.
So in my case it was a voltage issue with the X-Arcade and the USB audio being on the same USB hub.