It should work, but bear in mind that I've never really tried it.
You'll need to get some DOS Sound Blaster utilities to be able to unmute the line-in, but it can be done.
I also don't know what audio cables you'll need exactly, as I don't know what outputs the MT-32 has. It sounds like you know what you're doing though 😀 I do know that the SB16 uses a standard stereo headphone jack (the little size used by 99% of headphones these days, not the big phono plug size) for line-in (and most everything else for that matter).
There's no reason that this shouldn't work with all games.
Oh, the SB16 also uses a DB-15 joystick port for its MIDI I/O, but it is able to emulate an MPU-401 so you I think that means you don't need to have any drivers installed to let MPU-401 compatable games talk to your MT-32 through a SB MIDI cable.
Does that utility you got from Quest Studios not work with all games? If it does work then you probably don't need a new card unless you want to not have to use the utility.
Take everything I say with a grain of salt. I've thought a lot about it because I've always wanted to have that kind of setup myself, but I've never actualy got around to it.