One of the things I like about the Retrode 2 and N64 adapter is that it allows one to use their old controllers on PC games. This is great if you have a special controller like one with auto-fire switches or is designed like an arcade pad. However, there seems to be an issue with it trying to use it while assigning buttons in Mugen's options menu. The way the controller options menu is set up, it wants you to assign all the buttons at once. This can lead to some pretty bad controller setups.
Picture provided in this hyperlink (http://postimg.org/image/lzv6ebhnd/) to give you an idea of how bad it can get. I tried to do the left one with nothing but one N64 controller connected to the Retrode 2 via adapter and the right one with two of them connected. Surprisingly, the SNES and Sega Genesis controllers work normally (3-button genesis won't give full control, but that's to be expected). It seems like you need to really quick with the buttons on the N64 controller or something to get the controls right and even that can still not work right.
If you think it will help you understand the problem better, here's a link (http://www.elecbyte.com/content/mugen-hits-1.0) to the Mugen engine I use. I hope you will look into this problem and fix it if you have the time.