One thing you need to be clear on is the following (for RetroPie 3):

pifba has nothing to do with RetroArch, so anything referred to in retroarch.cfg wont have any affect at all, whatsoever.
http://sourceforge.net/projects/pifba/

lr-fba (fba libretro)
This does use the retroarch.cfg
https://github.com/libretro/fba-libretro

Here is how they are started via the emulators.cfg file

pifba="/opt/retropie/emulators/pifba/fba2x %ROM%"
default="pifba"
lr-fba="/opt/retropie/emulators/retroarch/bin/retroarch -L /opt/retropie/libretrocores/lr-fba/fb_alpha_libretro.so --config /opt/retropie/configs/fba/retroarch.cfg %ROM%"

You can choose between the 2 emulators by pressing x as you start the game.

However, they both use roms from /home/pi/RetroPie/roms/fba and they both need different romsets (as per link above). So you really need to choose which one you want. Using both would require some tweaking to various files.

So first step would be to choose which one you prefer. If you have a Pi2 I would be tempted to go with lr-fba as this uses a newer romset.