I had a moment to look into this. As it turns out, the issue is that when you use F9 and F10 to pause and unpause the game with Lab Monster Toolkit, the game swaps player 1's input to use the keyboard. This causes the buster drop. The simplest work around I found was to have Lab Monster Toolkit be the forward most application, and let UMVC3 read inputs while in the background. Then use the mouse to click pause and unpause as needed instead of using the hotkeys. Here is a youtube video showing the pause and unpause working by using the mouse:
If you prefer to use the hotkeys there is another option. It is possible to just do the combo on player 2 side by setting up the toolkit to control the dummy. Here is a youtube video showing that approach instead.