Hey! Good news! I got it to work.

Previously I was modifying the retroArch.cfg through cyberduck and using notepad.

Instead I followed a guide found at :

An A to Z Beginners Guide to Installing RetroPie on a Raspberry Pi 2 B+

Which shows how to modify the file inside the raspberry pi using their text editor.

Everything works now. Issue gone and can exit with controller.

Give that a go mate.