Haven't used the Rpi in a build so not sure this will be much help but a few things from the video :
1.) the adjustments you made to the red wiring is fine - as long as you are getting contact and they are staying in place they'll work fine with that adjustment. (Looks like you got a set of japanese button wires with the ZD encoder and are using the Happ buttons which use larger connectors which is the reason for the problem but opening them up like you did is fine and will not cause problems.
2.) The ZD encoder is a gamepad encoder so will show up as a gamepad with 12 buttons and not a keyboard emulator - which might be why it is not working in the emulator ( be sure you have it set to use a gamepad for input (again have not used the pi so might wait for someone who has that can provide more details) but it could be that emulation station is using the gamepad input fine (which is why it works) but the emulator is looking for a keyboard emulator instead of a gamepad emulator
3.) since it is working in emulation station the problem would seem to be a software problem and not hardware ( so the buttons and encoder are installed properly and working it is just the software is not using the proper input settings so is not registering the input.
4.) for the switches you have the wiring correct - the switches have 3 prongs - 1 is the ground - 1 is the Normally open connection - and 1 is normally closed. SO when using for a button that sends a signal when the button is pressed you would use the ground and the normally open connections ( then when the button is pressed it closes the circuit which sends the button press to the encoder) If you connect using the normally closed and ground it does the opposite and sends a signal at all times except when the button is pressed which then opens the circuit. So since it is working in emulation station and not constantly sending button presses (like it would if you had the wrong 2 connections made) You are connected properly !