To the best of my knowledge, nobody's done a homebrew Sega CD demo/game. It seems there are at least a couple people who know enough to, but without available documentation on how SCD's processors and CD interface work, you might as well develop for Genesis.
i respect final... and wont start a flame war, but to do such sacrilege.... Lunar 1 is red book audio (that means is CD audio) in most cases (other is synthetized). Just replace the tracks on te CD...
For Lunar 2 a bit more complicated... all the in game audio is PCM data... in actual files of the CD.. you would need to record the music you want, convert it to PCM 8khz if I remember right (some is mono some is stereo) and replace it.. then burn the image.. to do that sort of thing and screw just a bit the loading times etc.. you need something like CDmage to insert it.
Hope it is enough info.... althou I don't know why you would want to do such a thing.. Lunar is perfect as is =) and inal 7 too =)
I've tried to contact you by mail but it was unsuccessful. I'd like to talk to you a little bit about the PC-FX as I'd like to get involved in coding homebrew on it. if you see this, could you please mail me at email@example.com
Before I got ultra busy again, SegaCD is the direction I was wanting to go. Being able to play music/samples from the CD seems much easier (for me and my limited understanding) than doing major music on the genesis.
OK.... just realized the posts of interest were from 2001.... when there really hadn't been practical homebrewn SegaCD dev .