@mitu
Quick update.
Changing line 447 in /opt/retropie/emulators/mupen64plus/bin/mupen64plus.sh fixed my problem. I have changed pulse to alsa.
Further more I've created a simple script, named n64audio to run at start/boot.
In this script:
#!/bin/sh
sed -i 's/pulse/alsa/g' /opt/retropie/emulators/mupen64plus/bin/mupen64plus.sh
Made the script executable sudo chmod +x n64audio
After that sudo crontab -e
And added the line @reboot /home/retropie/n64audio
Now after every reboot pulse will be changed to alsa in the file /opt/retropie/emulators/mupen64plus/bin/mupen64plus.sh , if the line pulse exists.
So if I update RetroPie and mupen64plus gets updated and overwrites my file (and put pulse back in to play) it will be overwritten on the next reboot.
Again, thanks for all your help!