So this is looking great. Evokes a GBA vibe which is really nice.
So I did a quick paintover of some changes which will make it clearer.
-Each player presses A to join.
-Once a player has joined, they can press left or right to select their avatar/character.
-Pressing B will let players drop out (I didnt put that in the image though)
-Pressing RB (or whatever button you deciede) will let you add a AI player. I would probbaly have a pop up which lets you assign an AI to a slot.
-I also moved the return to menu and begin buttons too, to be a little more obvious. (I would also have it that when every player presses start that the game begins)
- I made the window backgrounds a solid colour to make it less noisy.
Also, add a dash. Dashing makes everything better.
Hope this helps, its looking realy good, keep it up!