I believe I just added music tracks per the instructions, and adjusting the cue was just regarding the track names. I could be wrong though since it was a bit ago, I don't believe it took much so let me know if that doesn't work for you and I'll take another look.
I see the problem, I downloaded the latest version which apparently includes music tracks now and it turns out they're in WAV format. As far as I know Fenrir doesn't support WAV format tracks, so that'd be the problem.
Use something like CDmage to convert it to bin and it'll probably work fine I'd wager.
Right so, I was curious and actually tried opening it with CDmage and received an error about sector size not matching the length of a track, so I guess that won't work. I'll play with it later.
Luckily this is SegaXtreme, and the answer to the issue is in this 17 year old thread! So the WAV files actually needed to be fixed before being loaded into CDmage, apparently most burning programs fix the sector boundary problem automagically, while CDmage/Isobuster/similar do not. Luckily, I use linux as my primary desktop, which had a package for doing exactly that:
$ shntool fix *.WAV
Fixing [TRACK01.WAV] (4:12.73) --> [TRACK01.WAV-fixed.wav] : 100% OK
Fixing [TRACK02.WAV] (3:06.36) --> [TRACK02.WAV-fixed.wav] : 100% OK
Fixing [TRACK03.WAV] (4:58.01) --> [TRACK03.WAV-fixed.wav] : 100% OK
Fixing [TRACK04.WAV] (4:25.04) --> [TRACK04.WAV-fixed.wav] : 100% OK
Fixing [TRACK05.WAV] (2:14.33) --> [TRACK05.WAV-fixed.wav] : 100% OK
Padded last file with 1832 zero-bytes
After this I was able to load the image into CDmage, and "Save as" to BIN/CUE. CDmage does this as a single bin, but it by no means has to be. This also converted the ISO to bin, but Fenrir does actually support ISO, so don't let that mislead you, it's just irrelevant to "why it's broken" here -- the WAV files are the problem. The converted image worked fine in my Fenrir.