Congratulations, you've really managed to confuse me 😀
So, let's start over. What is your ultimate goal? Do you want to run MT32 emulation in DOS, Windows 9x, XP or Vista+? Or everywhere? Do you want your games just to run a bit faster with Windows 9x? I'm really confused.
See, there are many problems with all those things you tried to describe. I hope I can add some clarification.
1. DOSBox is a really good thing for running DOS games. Accept that. Some people do want to build a native DOS environment and play "fair". It's their right and their love. But I'm afraid most gamers do not want to even reboot to play. So, a new PC with DOSBox on a modern OS is essentially what they want. Try not to fix what isn't broken 😉
2. If this is about running old games in a real DOS with MT-32 emulated, there are way too many problems. The emulation is quite demanding due to objective reasons on the one hand, and most of the old games require you to slow down the system on the other hand. If you disable CPU cache, you can forget about emulation in real time. Indeed, hardware of modern PCs are even less supported in pure DOS, btw. Are you sure your USB audio will work with SB emulation? I doubt it. You'll need a VCPI driver that emulates both SB and MPU-401 (yes, this one too!). Many MT-32 related games require MPU-401 in the intelligent mode, so SoftMPU project exists. Perhaps, we can join efforts and add actual emulation of MT-32 core, no idea. One thing is clear: there are a lot of effort to make this real for almost no reason.
3. Similar things apply if you want MT-32 emulation in Windows 9x DOS session. There must be a VxD driver that monitors accesses to hardware ports of SB (if you don't have a real SB of course) and MPU-401, and routes the data to the corresponding Windows drivers. AFAIK, the existing driver for routing MPU-401 ports does not work in the intelligent mode, but not 100% sure. There was a topic in VDMSound dev forum about but I'm not aware how did it go and what's the result. Again, there is a timing issue with old games in this environment. Besides, timer emulation just sucks. All these problems (and more) are already solved successfully in DOSBox.
4. In Windows 9x you can say good bye to all the cores except just one of your brand new multicore CPU. A pity. Even a dual core CPU easily handles the performance problem on Windows XP+ and Linux boxes. mt32emu works fine on a modern smartphone, so why one would need to optimise the existing mt32emu engine? I'm sure this is possible but the goal is different.
5. In Windows PE environment, the activation problem you are so scared of does not exist. You can easily add any video, audio or network drivers as soon as they are available. Indeed, you don't need a big flash drive. Windows X PE builds are considerably smaller than a full installation. Windows Vista+ PE is also far less than 16Gb as it is stored compressed in a WIM image. Same is with most of Linux "live" distros.
6. The wavetable synth built in Windows is faster because it does not synthesize the wave samples, it uses them from the table. Besides, it is not cross platform and heavily optimised. There are a lot of MT-32 "emulations" around that are much less demanding but this is not what we want to achieve with munt 😉
7. Why DOSBox needs ISA slots? All this becomes weirder and weirder...