This would really be something to ask on dolphin emulator forums, but basically you need the emulator to be able to differentiate between a usb and ps/2 input and be able to take both at the same time while keeping that differentiation and tying it to specific player. Otherwise both keyboards and windows are functioning as intended.
You might also try TeamPlayer which seems like it might do what you need if it'll play nice with your emulator:
http://www.makeuseof.com/tag/teamplayer-use-multiple-keyboard-and-mice-on-one-system/