Yes, I understand that the disc drive is tied up with other duties and could be acceessed for audio data. However, the "PSF" format that I mentioned works in the same fashion. The music functions in the same fashion. It is entirely related to the soundchip and the audio data is not read from the disc during playback.
With something like Onimusha, the music almost sounded orchestrated at times (in fact, many people initially thought that it was). However, it is handled like chip music and is not digitally pre-recorded. This format is used in a WIDE variety of PSX and PS2 games...
In fact, almost every single RPG you'll encounter on the two systems stick to this format. The only exception I can think of is Star Ocean 3 where, like Baten Kaitos on GC, the music was produced with real instruments and is played off of the disc.
According to the author of the PSF music plug-in, the vast majority of PSF music is sequenced...but there are a few (very few) examples streamed PSF music (ATV Offroad Fury 2, for example). From what I've heard, the sequenced PSF tunes sound VASTLY superior to any similar sequenced music you might find on Dreamcast and Saturn.
Honestly, I always thought it was a great feature of the chip. I mean, N64 could really have used a sound chip with capabilities like this (it could have used a sound chip period!). I mean, you have soundtracks like Final Fantasy Tactics (which was great) sitting at 680KB and stuff like Valkyrie Profile around 4mb.
There is also a PSF2 format, which is what the PS2 uses. It seems that many additonal features were added to the PS2 and its ability to play back sequenced music is excellent.
That's actually really sad to see. I've actually found the music in all of those Factor 5 SW games to be rather...poor, to tell you the truth. It seems that Extreme Assault really is the last notable soundtrack that he created. I have several class albums of his as well. He has done some great stuff...
That was an epic of a SID tune!