On retroarch, you need to find where you installed the program on your computer, within that directory you should see a folder called "system" All your bios files should go in there.
However, you should use PCSX2 emulator to play PS2 games and not retroarch. In that emulator, look to the top of the screen to where it says settings, then select bios option. From there you need to define the folder where you have the bios saved on your computer.
The error you are seeing is mostly likely because of the emulator not being set up and not a launchbox error.