I think I'm getting much closer...
A few different things that helped...
1. I did not need VDMS to emulate MIDI sound as XP has the MPU 401 capability already.
2. Adlib was not necessary either, and so I disabled that as well.
3. I used the normal soundblaster settings, though I will still experiment with using different outputs for it.
4. One reason that the changes were not having any effect, is because I forgot to change them in the WC3 installation setup. So now that I know, I have been able to get almost perfect sound, as well as video playback, working by running MIDI as MPU 401, and digital sound using Soundblaster/Compatible. I think I may have to write up a guide to what the settings need to be exactly when I have tested a little more. But it's very close now. I could see myself playing the game in this condition, though I will try to see if I can have it running at 100%