The following was found in Lord Brazen's Guide to Installing Master of Orion II v1.40 on Win XP:
After experiencing this first hand and searching hi and low for a fix I found one and feel this community is the best place to post it.NOTE: Some soundcards and sound drivers do not support DOS mode sound in XP. For some you may need to run a TSR or enable Sound Blaster compatability in the BIOS. Most AC97 cards will work well. Also, the game music may have clicking or static with some cards. I do not know any fix for this (try turning down the music volume in the game).
Just do a search for VDMSound 2.10.
It comes with an excellent guide and I have completely eradicated the annoying background crackles. It took some playing with the settings but it was well worth it. I am not in any way affiliated with the designers and I am not sure what support, if any, you would get from them directly.
Many thanks to Lord Brazen for his work on Master of Orion and the others who have\do contribute directly or indirectly.