ArcadeBliss, did you get this working?
If the P2 controls work in other games, then it can't be the jvs.ini file.
The only other thing I can think of is that in the NAOMI service menu you can set the machine to be a one or two player machine.
All the games I've tested just refuse to launch if you have it set wrong, but maybe this one is different.
There's an option in the main NAOMI menu. Not sure of the options in the gameboard menu accessed through the main NAOMI menu.
It's worth poking around in.
In all honesty, I don't think I've ever tried to play a 2 player game of MVSC2.
I will give it a try and report back if I have any issues with P2 controls.