It works if you go down to 1000 cycles, but that's far too low for the game.
The CD version GM driver is different than the one in the floppy version, despite both being internally labelled as v1.08. The CD version driver has a problem with the reset delay that was implemented in the MPU401 device: it sends TWO reset commands to the MPU and expects the second one to ACK in a short period of time. The floppy version driver sends only one reset command and will wait a relatively long time for an ACK. The driver in the CD version would work with the reset delay if it sent only one reset, or if it would wait for an ACK as long as the floppy version driver does.
Maybe the CD version driver works with other MIDI interfaces but not a real MPU401; can't be sure until it's tested. In the meantime, the GENMIDI.DRV from the floppy version of PQ4 can be used with the CD version. With a full install of the game you can just replace the driver file; with a minimal install you can put the driver in the PQ4CD directory and change the RESOURCE.CFG to have an absolute path to the driver. (e.g. soundDrv = C:\SIERRA\PQ4CD\GENMIDI.DRV)