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1. There are two different folders for N64 ROMs. Each folder will utilise a different emulator. Note that the non-standard N64 emulator doesn’t use the standard button mappings and often has to be tweaked separately.
2. You can either edit it via ftp or locally(or SSH) using Nano. If you do it via FTP in Windows, I recommend using Notepad++ to edit the files as Notepad does not lay out the file nicely.

To edit the file locally:

sudo nano /opt/retropie/configs/all/retroarch.cfg

This edits the primary config file and affects all Retroarch Emulators (which is almost all of them).

Each emulator has its own folder for individual configuration. EG:

sudo nano /opt/retropie/configs/psx/retroarch.cfg

The above lets you specify extra config just for the PSX.