@mitu Thank you and I'm sorry for not following what was clearly written down. In the future I will make sure I list all that is needed. In this case I figured out the solution but do appreciate the beginnings of the sites help.
So I was able to make this work by simply unplugging the mouse from the pi, leaving the controller settings in retroarch for fceumm set to auto NOT zapper, and then under settings change zapper mode to mouse.
I've found that if you forget to unplug your mouse before you start the game you can simply unplug it and the wiimote will take over immediately as the mouse.
If using a wireless mouse you must unplug the dongle not just turn the power off to the mouse. This could be problematic for wireless keyboard/mouse combos as you have to unplug the dongle and lose both keyboard and ouse function.
So far I havent been able to get the hot keys to work in game (even thought they work fine in emulationstation) to exit the game and have to use the keyboard for that unless you have a gamepad installed (which doesnt interfere with the wiimote as a mouse as a zapper) then you can use the game pad to exit the game.
@stoo Having lots of differences between FBNeo & MAME for system16 based hardware isn't surprising, system16 is a historical driver for Final Burn (first FB driver and first emulator to run that hardware, the emulator's name is actually based on "After Burner"), current FBNeo driver is built upon that initial driver. You should report the glitches at https://github.com/finalburnneo/FBNeo/issues, we can't fix what we don't know about :)
Could you tell me which buttons I should bind for the controllers axes so that it works like a light gun?
Actually, as long as you're able to use some utility to map mouse movement to the Wiimote's infrared movement from the Dolphinbar to simulated mouse movement, as well as map the mouse left click to the Wiimote's 'B' button, RetroArch should be able to read it without any further binding. However, you'll still need the set the mouse index number for each player in the player input binds. That setting for each player can be found by navigating to 'Settings' and then to 'Input'. Each mouse read by the operating system has a number and you'll need to assign those numbers to each player as you see fit.
Depending on the core, you may also need to change a setting here and there in the core options, or core controls. For example, to play most NES Zapper games, the player 2 device should be set to 'Zapper' in the core controls of lr-fceumm. Also, based on this particular setup, I believe that the Zapper should be set to 'Mouse', rather than 'Pointer' in the core lr-fceumm options. I realize this is all a lot to take in and to be honest, RetroArch's light gun implementation is a bit convoluted and incomplete currently, but it's a lot better than it was a few months ago and hopefully it will continue to improve over time.
And can this be done through the menu of the RetroArch
Fortunately, yes. All of the above can be done through the RetroArch menu.