Nice idea, I didn't knew about this, I assumed someone who played on Ps1 hooked his tv headphone port with the pc microphone port using a 3.5 mm to 3.5 mm cable at $5 from Radioshack or Circuit City, but I remember doing this and the sound quality wasn't as great. Still not bad though, it was about the same quality than audio cassette.
I only used MTV Music Generator (which is called Music 2000 in Europe) for Playstation 1 and PC so far, but I don't like the PC version because the controls are so annoying and not user friendly and it crashes quite often since I use Windows XP and it was for 95/98/NT/2000. I think the PC version was never released in Europe, but I'm not sure about this. It allowed 99 sound channels instead of 24, had much more sound memory and allowed importing wav files and saving songs as wav files, but again it was pretty unstable.
For now I use the playstation version of MTV Music Generator on ePSXe, which is a Playstation emulator for PC. I record songs using Audacity which can be found at http://audacity.sourceforge.net
so I get CD-like quality. It requires insane computer ressources though but I am quite fine on my Pentium IV 2.95 GHz.
I currently have to use a pirated copy of the game because the Playstation copy I bought in 2002 which I still own doesn't work anymore
Below is attached a screenshot of the PC version of Music 2000, released in USA one year after the original PSone version