I haven't figured out what exactly is going on yet, but there seems to be a bug with sprite flipping and translating transforms. The first part of the GIF is a prototype running in Unity 5.3.4. Everything works as expected. The second part where the sprite moves all about is the same project running in the preview build. I'm not using Rigidbody2D. The character controller uses raycasting and transform.Translate to move the sprite.