I just burned a couple of games without converting the MP3s to WAV. Did CDRWin just convert them itself when it was burning? I've usually used MP3->WAV. What's going on? It couldn't have just copied the MP3s across right? or the MegaCD wouldn't run them.
You don't *need* to convert to wav first. However, if you don't, then burning will take a lot more cpu power, and on top of that, what if you are doing something on your computer, and cdrwin isn't decoding the mp3 fast enough? Also, I'm sure that cdrwin's (or any other burning program that decodes on the fly) method of converting to wav won't give you the best possible sound. Your best bet is to stick with converting to wav first.
I'm just speaking from experience. I used to always use fireburner and burn from the mp3 (dunno what version Ratamahatta had, but mine decoded on the fly) and before I had a burner with burn proof, I would get buffer underrun errors quite often if I was doing stuff. Maybe my computer doesn't multitask as well as yours, but that's just my experience.