When I press the "back" button on my Xbox 360 wireless controller (using a USB dongle to connect) on my PC, steam-activated version of Skyrim, the Favorites menu comes up instead.

Yet in the Controls menu it's telling me that the "Wait" command is assigned to the "Back" button. I tried re-assigning "Wait" to "Back" (even though it's already set to that) and I get a "this button is reserved" error. Really strange.

Why would you use a controller when you have keyboard and mouse is beyond me..

Some people are way more used to it?
I'm a Console player, used a controller my whole life.
I tried playing Oblivion on the PC..... bad things happened.

Hmm you can try setting it back to default. For the game just delete the skyrim.ini.

I think the right one is in your My Games/Skyrim folder.