Dynamic music (unfortunately) only works best with MIDI when it comes to implementation, as MIDI generates it in real-time so it's easier just to switch the instruments, add an "end" to the current piece of music then add a "start" to the new one.
With digital files you're going to need more programming - Halo has all it's music cut into 5-10 second chunks so they mix well (did a good job of it too) but not many other games do this. Serious Sam simply plays one digital file when the atmosphere is calm, then fades that out while fading in the "action" music. This works well actually
I haven't listened to how UT3 does it yet, I usually have the music cut down or I play my own in XMPlay.
With digital files you're going to need more programming - Halo has all it's music cut into 5-10 second chunks so they mix well (did a good job of it too) but not many other games do this. Serious Sam simply plays one digital file when the atmosphere is calm, then fades that out while fading in the "action" music. This works well actually
I haven't listened to how UT3 does it yet, I usually have the music cut down or I play my own in XMPlay.