One thing I'm puzzled about : The above screen shows the screen setup to select the MIDI device.
Games like Warcraft II, Settlers II, etc., do have options to play either on-disc digital audio or MIDI files. So I'm not surprised if the above game supports both formats.
So from your statement above, the beginning music is a MIDI file - because you can hear it, and possibly all in-game music is through the cd audio tracks? (And I also assume that you have only a single CD/DVD drive?)
And also, you mentioned on inserting the cd, "it open up itunes and it has the music track of it". How many tracks are there in it? Does it play all the audio tracks without trouble?
Have you tried playing other DOS games with CD Audio tracks, and do they work? (If available.)