This is the experience I had just now. I can't even wrap my head around what could have happened.
Turned on both Move controllers, loaded my "Program Files (x86)/FreePIE" with PSMove API dlls and plugin. Ran "PSAPI_hydra2move_new9" script. Diagnostics showed position x and position y on psmove freaking out like I've been getting.
Closed FreePIE. Remembered that I still had Zelmon's most recent "Release" build on my desktop. Opened that up, tried to run the "PSAPI_hydra2move_new9" script, but got an error due to the plugin not recognizing the attribute for reading the battery level. So, instead, I loaded the older "PSAPI_hydra2move_new6" script. Upon running it, psmove was acting completely normal. Both position x and position y were fully functioning and tracking.
Felt encouraged, so I grabbed the files from Zelmon's "FreePIE_PSMoveAPI_DLLs-201605211530.7z ". I put them in their respective folders inside the "Release" build, overwriting the existing files, loaded up "PSAPI_hydra2move_new9", and upon running it, psmove was behaving correctly again. Hooray! I loaded SteamVR, did the Hydra setup, and sure enough, nothing was glitching. What was happening though was psmove's yaw was backward.
So, I went back to the script, stopped it, and noticed that I now needed both yaws to be inverted (how I had one inverted but not the other, who knows). I did replace those 16kb and 18kb sixense dll's in SteamVR though. So, maybe that got me on the same page with Zelmon. Back in SteamVR, everything looked good, but for some reason, pressing the PS button wasn't bringing up the SteamVR menu for some reason.
I exited out of SteamVR, went back to FreePIE and checked to make sure everything was working properly. It was, but I noticed that not all of the buttons were being tracked in the diagnostics (mainly, the PS button for psmove). So, I simply added that line of code to the diagnostic section for psmove. No big deal right? Wrong. When I started the script back up, the glitch was back with psmove. Position x and position y were freaking out.
Naturally, I closed FreePIE and restarted it. It's still doing it. The weirdest thing is, the orbs are flashing differently now at start up than they were before I added that simple line of diagnostics.watch(psmove.getButtonDown(PSMoveButton.PS)) How in the world could that break everything? It makes no sense.