Hi notbillcosby,
First of all, welcome to our community..and thanks for giving a try to mGalaxy!
As soon as I press player 1 start the game.... Is this because I'm setting it up using my keyboard rather than an arcade stick setup?
Yes, clearly! The use of Player 1 in combination with another key is "reserved" to arcade joystick users (using a keyboard encoder like this one:
http://www.ultimarc.com/ipac1.html
Look at this table:

The first column is the key that is received by the computer (and that YOU should press when using a keyboard).
The second column is the action driven by that keypress
The third column is the joystick & button actions used by joystick owner (and then the keyboard encoder transform those actions to...keypress, as you would do with your keyboard)
Is is more clear to you like this?
Keep in mind too that using mGalaxy Runway (which is joined to mGalaxy) you can change the default keys used by mGalaxy, if you want to!
Is there a way I can tag these games as 'adult' as I'm going through the list in mGalaxy?
mGalaxy uses a file called "Catver.ini" to judge if a game belongs to a category or not.
What you could do is simply open that file, edit the line corresponding to the game and add "Mature" after the slash.
Example: one of the first lines in "Catver.ini" is that one:
005=Maze / Shooter Small
change it to:
005=Maze / Shooter Small
Mature
and the game named "005" will be hidden (if you've made the choice to hide mature games in mGalaxy option)
Voila! ;-)
I hope that I've clearly and simply answered your questions!!