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I certainly don't speak for MTU, but until they respond this is my understanding.
The procedure you described is essentially correct except that instead of a mp3 file it is a wma file which generally speaking will give you better sound quality at the same compression as a mp3 (or the same quality at higher compression).
However I would not be surprised if your friend is correct when speaking of KMA's that have been created from mp3g's or zipped mp3g's as those have not been converted or altered the way .BIN's or .CDG's or import from CDG's are. Consequently songs imported from mp3g's with a bitrate of 128 will not sound as good as those imported from disk @ 128.
Again IMHO, although curious to hear from MTU to see how far off I am!
Sam
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