Ok I didn't read the whole thing the first time. Sorry about that. You won't see 2 mice in Windows, but you doo need Windows 98 regardless. You'll have access to the 2 mice once inside MAME.
I'm not sure how to configure it without changing the individual game settings, but there aren't many games that used more than 1 mouse, anyways. There may an easier method, but even this method shouldn't be so difficult...