I think I figured out why some people can get moonshell to soft-reset and some can't. For me, in order to get soft reset to work in moonshell, I had to go to the games menu and press the "R" button to turn the icon green. Once soft-reset was turned on in the games menu, then it worked in moonshell (pressing Start). If I turn that icon red, soft reset doesn't work in moonshell. Pressing start just displays debug information.
Hope that works for others.
BTW, get used to the error screen on startup. It only stays on the screen if moonshell encounters a problem booting.