So finally after loads of coffee. all the games work 100%. After studying how Mame uses its CHD files , all one had to do is extract all the CHD files from all the games, as in the pic above into same directory as the roms.
Unlike mame, the CHD files don't have to match the rom names. But after running it via GameEx we still had to scroll to select the file.
But putting back the original line command, demul.exe -run=naomi -rom=[ROM] did the trick. The game executes automatically, with no need to select it manually. I'd recommend using a map file so as not to see all the CHD files when selecting a game. Also you can delete the CHD file from the zipped rom. No need for to have them there now. Just leave the other files behind.
So all really that should have been done was extract the CHD files and viola. All works. But it was a good experience.
Hope this helps others who are having the same problem. Thank you TThurman for giving me a kickstart. I've Uploaded a video with final result
noamiGD.mp4