Munt isn't something that's will be detected. Your soundcard has an MPU-401 built into it, this is mapped to an IO port (generally 300 or 330). Any MIDI playback is directed at that IO port and then sent out via the physical interface, but it's send only it's not expecting a response back. Bottom line it sounds like something is wrong if your soundcard configuration. Since you mentioned Sound Blaster diagnose.exe, are you using a newer PnP Sound Blaster? If so don't use the regular drivers, try out Unisound instead. It simplifies the process down to you creating a SET BLASTER line with the ports you want mapped, and then running the program. It will then configure the card with what you selected and then exit. No hanging around eating up resources.
As for running MUNT directly, the first issue is resource usage. MUNT is fine on modern PCs, but running it on legacy hardware that's also trying to play a game? Some people have gotten it working using DOSBox under Win98. But that I'll bring up, what's the point? You can run DOSBox on newer computers and have the exact some experience. And you mentioned Fate of Atlantis, that runs great under SCUMMVM which includes MT32 support right in further simplifying things.
There are programs which create virtual MIDI ports that let you not need physical cables. But everything I'm finding is 2000/XP and up. If you want to play the games on your Win98 machine, then focus and getting your soundcard setup correctly. Once that's working then try improving the setup.