Yes, sound fonts are for GM. The MT-32 was a specific synthesizer from Roland and didn't have RAM to put sond fonts on. It had its own sound font inside a ROM. It is also older than the GM standard, IIRC, which is the reason why the instrument layout is different than on GM.
That's why when you try to play .mid files for MT-32 on GM they sound completely wrong. It's because wrong instruments are being used.
You are right, the music for Legend of Kyrandia was originally composed with the MT-32 in mind. I still have the .mid files on my hard drive that I extracted from the game back in the day from the original version. And they sound nothing like what they should with the arachno sound font. I know because I just downloaded the sound font (Which seems to be quite good, btw., though not quite as good as the good old SCC-1.) and tried to play the .mid files with them.
Either newer versions of the game also had GM versions of the .mid files or the game (or perhaps even ScummVM?) is doing something to correct the instruments when you set the game to GM. There is no other way to explain the video you linked to (except foul play) because the sound there was really good.
[Half an hour later.]
Ok, I got curious about that and installed the game to check it out myself. Seems I guessed correctly, it's ScummVM that is doing the instrument remapping and it even tells you so. ;-) The movie still sounds better than the result I got but what I got was really close with only a few wrong instruments. Since GOG is using a pretty old ScummVM version that might explain the difference.
So if you want the same result than in the video you should get the Bassmidi driver, set it up correctly to use the arachno sound font, update ScummVM and set it up to use the virtual MIDI device that Bassmidi creates.
According to the manual selecting the sound font in the MIDI section is only good if you use one of the internal MIDI emulations that support sound fonts, like Fluidsynth. It does nothing for MT-32 emulation, which you seem to have enabled since you get an MT-32 error.
ScummVM's internal MT-32 emulation is based on Munt which requires you to have the MT-32 ROMs. If you don't have them it will not work which explains why you aren't getting any music.
While the MT-32 emulation through GM using the arachno soundfont doesn't sound bad in Kyrandia I still prefer the original MT-32 sound. If you want to experience that I recommend you get Munt and the MT-32 ROMs and install that and then configure ScummVM to use Munt's device.
Edit:
While checking Bassmidi and Munt I found both had later versions available than I had installed. After updating both of them Bassmidi refused to work. The configuration program instantly crashed when trying to start it. Nothing that I tried helped, including going back to the old versions. :-(
That led me to trying out alternatives. It turns out there is a great alternative to Bassmidi that is based on the same Midi libraries but has more features and better configuration. Instead of Bassmidi you should get Coolsoft VirtualMIDISynth 2.0.0. This is better than Bassmidi even though it is still in beta. :-)
Post edited November 17, 2016 by Geralt_of_Rivia