In the Microstudio manual, find the Table of Contents, then the Troubleshooting Tips section, then the link to the Cue Sheet... problem to give you a bit more insight on the formats involved.
Many users have taken a CDRWIN .bin file that represents a single track, rename its extension to .cdg, and Microstudio will write these files to a CDR disc.
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I perceive the problem to be the following. A CAVS mcg zipped file contains two separate files. One is an MP3 encoded audio file, and the other is a file that contains the "RW codes" that draw the graphics/lyrics for Karaoke.
To use a mcg zipped file, you must have a program that will unzip it, convert the mp3 audio file to a .wav audio file, then take the RW code file and interleave the RW codes into the audio (.wav file) at the appropriate sectoring for the CD+Graphics format.
I believe that CAVS claims to have a $70 program that converts their .mcg files to .cdg files. However, the feedback we have heard so far is this is NOT so. The resulting .cdg file is NOT a correctly formatted CD+Graphics format file. It will not play in a Karaoke CDG player, and it will not be recognized by Microstudio as a true .cdg format file.
Currently, the only way we are aware of converting a CAVS .mcg file to a TRUE .cdg file is to take the audio .mp3 file, convert it to a .wav file (there are several non-MTU programs available that can do this), then take that audio file into MTU's Karaoke Home Producer software, type the lyrics in (unless you find a program to convert the RW codes to a .txt ASCII format file) and place the lyric words to the music.
In other words, I am not aware of a simple, easy way to convert a CAVS song to a true CD+Graphics format .cdg file.