Mame is not set up to use the new actlab 2 player method. Actually, the code looks like it will work in win98 & winME as a side effect, but not win2k/XP.
// if out of range, skip it
if (!use_lightgun || !win_physical_width || !win_physical_height || player >= lightgun_count)
Win2k/XP can only count one lightgun, while winME/98 do count the number of lightguns. Sounds like you'll need to either edit above line or use MameAnalog+.
Hmm, I think changing the line to if (!use_lightgun || !win_physical_width || !win_physical_height || (player >= lightgun_count && player > 2))
will do it.