To pick the level you wish to start at, the number of lives, and even the color of blood, when you are on the main option screen where you can choose between Arcade mode, Saturn mode, etc. Press L, R, R, L, L, R buttons. You should hear a jingle, then hold the L & R buttons, choose a mode and press "Start." You should come to the debug menu.

NOTE: The Japanese version may not give you the option to change the color of the BLOOD.