You roll 2 dice and must use a melee attack to attack a minion in the same space with the staff.
The section you quoted is the cards Ability. (page 4 pdf, page 2 rule book)
4) Ability: any special rules that apply to the card are described here.
That special rule requires that you may only use it to perform melee attacks on minions in your same space, but normally the rules do not prevent this.
Item bonuses add to the number of dice you roll when performing a specific type of attack. Ranged attacks count bow symbols as hits, melee attacks count sword symbols as hits. Nothing in the rules prevents you from using a ranged attack on a minion in the same space as your mouse.
Melee Attack - [...] Then roll a number of action dice equal to that mouse’s battle value. Remember to add any bonuses that the mouse’s items or equipped weapons might give it.
Ranged attack - If a mouse is armed with a ranged weapon or spell, it can perform a ranged attack. Ranged attacks are performed in the same way as melee attacks, except each bow symbol counts as a hit instead of the sword or sword/
shield symbol. Also, when selecting a target for the attack, a player can select any minion on the same room tile as the attacking mouse as long as that mouse can ‘see’ the target. However, if there are minions in the same or adjacent space as the mouse, one of those nearby minions must be selected as the target of the attack. (page 13 pdf, page 11 rule book)
The FAQ and the designer further clarified that Maginos gets the +1 from the staff regardless of whether he is performing a melee or ranged attack.
1.1.5: When attacking a minion in the same space using Maginos' staff, do you still get the bonus listed on the card for a ranged attack?
A: Yes, just imagine that the bow changes into a sword any time Maginos shares a space with minions.
Q: about maginos' staff. It has a +1 on top of a range symbol in the top corner. Does the staff still give a bonus to melee combat, or only to ranged because that's what the +1 is over?
A: It adds to his battle any time he uses it to do a battle action. The +1 just signifies that it is a bonus to his battle, the bow shows that it hits on bows and can be used at a distance. The weapon special ability breaks this rule a bit and allows him to hit on swords/sword shields when attacking an enemy in the same space. Usually, when you use a ranged weapon, it only hits on bows even if you use it on an enemy in the same or adjacent space.