Powering Nerf Gun With Wall Adapter
Multimeters are not ideal for finding the peak current draws. Even if 1.7A is what is shown on the screen as the peak, it doesn't mean that it is actually the max that was pulled. Since 2 Amps is close to what you are reading as peak, there is a good chance that you are pulling too much current from the power supply.

Also, many power supplies drop their voltage even before you get to their current limit. You would have to find the datasheet for your supply to know what its current/voltage curve looks like. It is possible that your PSU just isn't providing the required power to get engage what ever is doing the work in the gun. The stall current on mechanical items can actually be much larger than the current that is pulled afterward.

Ideally you would want to get a scope setup to see what is going on, but if you don't have one it will be much easier to just get yourself a larger power supply.