If you want to know the truth [8D]:
It uses DirectMusic, which uses waveform samples. I found the authoring tools in the old DirectX SDK, but playback seems impossible without a hardware wavetable soundcard. (I tried two emulators to no avail.)
Except for the lack of players DirectMusic was a good choice back then:
- integrates with DirectSound
- 'MIDI'/tracker music is small
- can define loops for infinite playback
- switches sound tracks at predefined positions; no hard cuts; the player walked into a new area, but the old sound track continues until a silent part or a bridge is reached
By the way:
Btrayal at Krondor (1993) already made use of wavetable soundcards by replacing some instruments through sample uploads. In theory it could have sounded just like Drakan with only MIDI under MS-DOS. But in practce the samples were too low quality back then. (I had a wavetable MIDI card then.)
I wish someone would rerecord the tracks outside of the game, because especially the GUI track is too loud and thus noisy#8230;