Well, I think she did manage to establish him as unbalanced, but to me it came off as the sort of unbalance one gets when trapped with Kreacher in a house full of bad memories with little company and no relief, more than an inherent unbalance. (Other than his pre-existing issues, which were really a result of growing up in that house to begin with.)

I saw him looking for James in Harry, I must admit. I saw it, however, as hope rather than confusion (looking for... not James so much as a friendship similar to what he'd had with James, where he could go off and be reckless and have fun,) and I do think he very much took Harry as Harry, and showed more concern for him than anyone else there. Absolutely. Remus backed him up to a degree, but I couldn't be sure that Remus would have ever said anything, if Sirius didn't. From my impression of him... probably not.