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It may default to KBM and since the deck is in gaming mode (controller) because the game has controller support, but since the game did not recognize a controller you can't input anything unless you go desktop or external KbM for the installation.
Some games default to controller when they sense there is a gamepad but don't recognize the JupiterHolo drivers and default to xbox/PS/Nintendo setups, unless you go and change the gamepad settings to mimic something the game recognizes. (user created profiles/suggestions usually automate this at installation/startup but sometimes it is not automatic) This causes the game to load and run just fine without accepting input from the steam deck as it waits for the 'controller's' input.
I have not run ESO on my steam deck, but I have run tons of other games (including a couple of mmos) and this is usually the reason why a game will load but won't respond to input or changes the UI to something unusable.
To fix this, do not enable accessibility mode until you go to the character select screen and choose your country. Use the mouse controls to navigate through this then go to settings and enable accessibility mode. This seems to have fixed it for me! Hope you had luck!