The Classic controller doesn't seem to be best for N64 games. But anyway, Classic has 6 (7 if you count in Home-button) face buttons, 4 shoulder buttons, D-pad and 2 analog sticks. GC controller has 5 face buttons, 3 shoulder buttons, D-pad and 2 analog sticks. So i don't think the problem will be in the number of buttons, but how they are used, is a different matter.
Regarding the file size, the amount of memory required depends highly on how much the Saturn games can be compressed. The Saturn disc held about 600MB of data (if i recall), but i don't know how the data was compressed. N64 games could have had 10:1 compression ratio, but i don't know about Saturn. So, assuming the games can be compressed to 1/3 of the original data size, it takes "only" 200MB per disc, but i would assume that the compressed data size could be closer to 100MB than 200.
@Happy Squrriel: Or another compression method, since they existed even then. You should keep in mind that neither Saturn or PSX were powerful enough to decompress video or audio real time.
Anyway, i find DivX unlikely, since you need to pay for it. I don't think the effort for videos would be a problem, since you need to modify the games anyway.