I think that chip tunes for battles and towns in CD RPGs were used simply to keep the overworld bgm from restarting constantly. That's why games like Ys used chip tunes for towns, even though it doesn't have turn based battles. If anything chip tunes should take up more memory and would add to potential load times. It only takes <1 second to switch a CD track.
Insanity's entire soundtrack fit into like, one bank of memory. You could probably load the music for MSR into memory and never have to reload it, assuming you do the chiptunes properly (Use repeats/macros to save space).
Chiptunes don't take much space.
You could also probably have swapped Squirrel into the equation near painlessly (aside from making the MML for all the songs, lol). You'd just be swapping the CD play calls with Squirrel ones!
But, it's no biggy, and I am definitely not saying OH THE CD MUSIC IS STUPID WHY'D YOU EVEN DO IT. I just like chiptunes 900000x more than CD music and almost always prefer them. Shadow of the Beast is one of the exceptions.
I am just thankful the songs for MSR don't have that stupid early 90s Toys R' Us keyboard sound to them. If it sounded like elevator music at a sears, I'd be pretty pissed off.
Anyway, it wouldn't have really changed anything as far as CD access goes. Tons of data is tons of data. Bopping over to the CD track is the least of the worries, I'd bet.