hmm, you sure you have to download the .grp ? I watched a video yesterday actually if somebody going step by step with the install and went straight into duke 3d without any issues, using an sd card image downloaded from the site.
As far as the settings, I sftpd in to copy the file over, than restarted the pi, than when I noticed it didnt work, I copied it back to my local computer to see if it was empty and its not.
How easily do the usb controllers work? The 360 controller for now is just a temporary solution until i get my case built, than I will be switching to dedicated nes/snes and genesis usb controllers, just wasnt sure if they work out of the box, or require special drivers to operate.