First, open a game that you know steam remote play works on. You can use almost any local co-op game. Invite everyone who wants to play battleblock using remote play (this is important, if they do not join in this first lobby, then they won't be able to play when you host battleblock). After everyone joins, open battleblock, so you have 2 games running at the same time. Close the first game, the one that isn't battleblock. Then invite everyone to play battleblock with remote play.

To reiterate, do everything in this exact order:

• Open any other local co-op game that supports steam remote play
  
  
• Invite everyone to play steam remote play on this unrelated game (and they all must join, this step cannot be skipped)
  
  
• Make sure everyone has their controller plugged in and can play the first game (if they can't, or their controller is otherwise malfunctioning during this first game, the malfunction will carry over to battleblock. you have to fix whatever the problem is before moving on to battleblock.)
  
  
• Open battleblock theater
  
  
• Close the first game (make sure battleblock is actually open before doing this, if battleblock isn't open yet it will not be able to detect the other players' controllers from the first game)
  
  
• Invite everyone to battleblock theater with remote play. It should now work.