Start a new "SENGOKU GAME", and when asked "How many players would you like?", choose the number of players,. Before pressing the A button on Controller 1, press and hold Up + Left + B on Controller 2. You'll be asked for another question: "How many human players would you like?", so you can select from one to four human controlled players; the rest of the players will be CPU controlled.
Watch a Game
Start a new "SENGOKU GAME", and when asked "How many players would you like?", press and hold Down + Right + A + B on Controller 2, then press A on Controller 1. The new game selection menu will appear. You can choose from 5 different games to watch. All of them will be played by four CPU controlled players.