I solved the issue. Apparently the order of the XML tags inside "system" is relevant. Looks like I was simply creating a new text behind the background... After moving it to below the background image tag, it finally showed up.
Here's the final code (after the background image tag)

<text name="by" extra="true"> <pos>0.85 0.969</pos> <color>ffffff80</color> <fontPath>./art/font.ttf</fontPath> <fontSize>0.02</fontSize> <text>hello world</text> </text>

Text tag reference on ES md documentation

@TMNTturtlguy So I ended up writing a small patch for the sselph scraper after all, I'll just have to run the scraper from my desktop machine instead of the raspi. (And if I do that, I can also write all the files locally first so that I don't have to keep emulationstation shut down during scraping, which will be a nice side benefit). I also submitted a pull request to add this feature to the mainline scraper which people can see here.

I wanted update the manual way for anyone who needs to fix this in the future.

To run the script file you need to ```
sudo bash ~/RetroPie-Setup/retropie_setup.sh

Once the script runs 1. Manage packages 2. Manage core packages 3. retropie menu 4. update from binary If your missing the RetroPie-Setup directory, sorry you're going to have to reinstall. Hope that helps someone!