Well, maybe you omitted some part of your explanation as to how to get the VGM in Kega thing to work, but I couldn't draw any blood from that stone; it sounded just like the straight-up VGM file played through any number of different plugins.
I might look deeper into it if I come up with another GYM/VGN rip I want/need to do in the future, but for now, this sounds just like I remember it.
Yeah, if the process is simply to drag the vgm to the vgm_play exe, then run the resulting .bin file in fusion... then it still has the awful drum distortion. Even if there's some step elsewise, considering the GYM files sound great, I can't imagine messing with that process instead.
If the distortion you notice is noise in the DAC, it's because the sound driver code for the game probably isn't the greatest. The VGM format (as far as I know) is a perfectly accurate log. What you are hearing is what the game is instructing the chips to produce, unmuffled, unfiltered, and as clear as a bell. A hairy bell.
Well, from what I'm hearing, the VGM and the actual sound test sound exactly the same in Fusion. Which, again, is nowhere near as bad as that example mp3 that was provided.