Ok, so making some progress. With my original image of retropie 3.0, again controls in emulation station menus and Kodi work perfect, just emulator controls for playing games are screwed up.
Now, if I exit to terminal and run jstest /dev/input/js0 I can see my inputs pressing buttons on the 360 pad. For example it tells me that B=1, start=6, and x=2.
If I go into the retroarch setup and configure controls (I did this from the retropie menu IN emulation station) and setup for joypad controller and watch the inputs it gives me a whole new set of settings (B=6, x=7, for example).
So it seems no matter what settings I change in /opt/retropie/configs/all in the cfg file, nothing changes in game. Meaning that config file isn’t impacting gameplay. The bit about the retroarch controller setup is where I see the issue. If I go into an NES game I found out that when I hit B and X together, it exists game back to emulation station. Note that jtest tells me that start and select at btns 6 and 7 (and in a game B+X exits the game).
When I do the controller congfig through retroarch setup the Xbox360WirelessReceiver.cfg file is updated. However, when I go in and edit that file to set controls to what I think they should be NOTHING in game changes. B+X still exists game.
Any ideas on how to fix this?