Wow, I have been struggling forever to figure out what was going on with this issue! I was pretty sure I was doing everything right, but then I stumbled in here, and sure enough, I have the 2 cfg file issue too!
Since it's been quite a while since this post was last active, I chose to copy the entry to
/opt/retropie/configs/all/emulationstation/es_systems.cfg, rather than delete the apparently-redundant one, as who knows what's changed since then! :)
<system>
<name>dreamcast</name>
<fullname>Dreamcast</fullname>
<path>/home/pi/RetroPie/roms/dreamcast</path>
<extension>.cdi .chd .cue .gdi .sh .zip .CDI .CHD .CUE .GDI .SH .ZIP</extension>
<command>/opt/retropie/supplementary/runcommand/runcommand.sh 0 _SYS_ dreamcast %ROM%</command>
<platform>dreamcast</platform>
<theme>dreamcast</theme>
</system>
Incidentally, a lot has certainly changed on the hardware side too. If you've got a RPi4, install the Flycast core instead of Reicast. Holy moly it's so very close to the original experience now!
Thanks to all involved for bringing up and solving this issue; I can finally play around with some of these games instead of tweaking settings endlessly now!