I mean, yeah, its going to "work" but even though you cannot see it, those two diodes will be trying to dissipate 2x the heat. You may want to check the actual part they used for the bridge rectifier. The original PB101's were rated for like 4A, so from a power dissipation perspective 4A and 50$% duty cycle, so 2A @ 100%. If the actual part is rated higher, then you are OK.
Hmm I believe the c64 uses the A/C voltage for the internal clock (jiffies). I may have to probe around on the board later when I get time and see if it's going anywhere, the schematic shows it going off somewhere but ... to what? maybe nothing.
The old wall wart type adapters typically just contain a transformer and do not have a regulated output. They are rated for a voltage and a current. They will drop in voltage when you draw a current through them - so you can't really get a full picture by measuring the voltage at zero load. Typically they will measure high, but under the correct load they will drop to the correct voltage. All transformers have losses, but I think this is more apparent when trying to re-use the relatively inexpensive adapters that were designed for and provided with a specific piece of electronics in mind - and then trying to use that adapter under a different load.