Ok, thanks for the clarification. Good to know that finally Denise will support C128 emulation too!
Viewing post in SNK vs CAPCOM for C64/C128 - Stronger Edition comments
This is not a full C128 emulation. The C128's VDC (second graphics processor) is not emulated. The emulation is limited to the behaviour of the VIC-II in a C128 with switchable 2 MHz in the border area. The VIC-IIe in the C128 is also only designed for 1 MHz and has no additional graphics capabilities.
The advantage is that this can be provided within the context of the C64 emulation. In Denise's C64 menu under System Management, there is now an option called "C128 in C64 mode." This simulates a C128 that has been switched to C64 mode.
Denise 2.7 is ready. (can not link here, get "turnstile" error)