ShadowWulfe: Sorry, I was not clear, I did not "make" the Music folder as it was already present. Any attempts to conver to the .wav yield no looping music however. I use the community patch for the Merge.
Oh That's good, had me worried for a bit!
You mentioned using the community fixes patch, have you also installed the Grayface 2.4.1 MM8 patch? I believe it may be required for the wav files to work.
The mp3 files should be moved out of the "Music" Folder
All the mp3 files (2-51) should have their wav conversions placed in the "Music" Folder
the mm8.ini should have been edited to the following (After running the game at least once, post Grayface patch):
PlayMP3=1
MusicLoopsCount=0
And as I mentioned previously: If you haven't already, set both "MM8Setup.Exe" and "mm8.exe" to Windows XP Sp2 compatibility mode. This will also allow you to use Hardware 3D mode (native widescreen support!) through "MM8Setup.exe" and may solve other issues.
I just tested this with a new install/build of Merge, Grayface 2.4.1 patch, the latest full community fixes, and the converted wav files. Started a game in Enroth and waited around to ensure the music looped. It did.
If you haven't installed the Grayface patch on your current install, it may be a good idea to create a new separate Merge Install so that your current game won't be impacted. And just copy over the save games to the new install once you've verified everything works as it should.
Hopefully this will help!