Had to turn my Wii on to figure that one out. Your answer: you have to click the L button all the way down. You can't just tap it. Same goes for R and the camera control. I anticipate this will be true for every VC game using L and R. Also, you can use the GameCube pad's Z button as Z as well.
So far there's no telling if Nintendo is uniquely configuring a GC control scheme for each N64 game. I, like you shrapnel09, assume that this will be the standard button layout for all N64 games. However, more important is that the Virtual Console tells you (as does the Wii manual, I think) that VC games have been optimized for the Classic Controller - in fact Super Mario 64 tells you this every time you boot it up. Of course they want to encourage sales, but I don't want to see games that are unplayable if we don't own a Classic controller.
With this "optimization" in mind, I would further surmise (without any way to prove it even if I did have a Classic Controller) that it is possible for each N64 button to be mapped differently on the classic controller, depending on the game.
More mysteries: I wonder how games with multiple control schemes will play on GC and Classic, as well.