You must play through time attack in challenge mode and finish level 20. A message will alert you that another player has arrived. To get Kusanagi, highlight Kyo and hold R TRIGGER, then press any button. To select Orochi Iori, highlight Iori and hold R TRIGGER, then press any button.

Go to challenge mode. You must play through time attack and finsih level 40. After that you will get a message saying that another player has arrived. To get Geese, highlight Billy, hold down RIGHT TRIGGER and enter any button. To play as Goenitz, highlight Rugal, hold RIGHT TRIGGER and enter any button.