We present an ab initio molecular dynamics study on hydrogen adsorption in potassium-intercalated graphite of second stage. The simulation utilizes the ultrasoft pseudopotenals plane wave method under local density functional approximation. The optimized lattice structures and the calculated H-2 adsorption energy are in excellent agreement with experiments. The simulation also well reproduces the previously observed lattice expansion due to H-2 uptake. The dynamics investigations reveal that not only the adsorbed hydrogen molecules but also the intercalated potassium atoms are highly mobile and assume a variety of two-dimensional configurations. The hydrogen dynamics is essentially chaotic within a layer of about 1.4 Angstrom, thickness centered between the graphite sheets, with a closest C-H distance of about 2.2 Angstrom.