So about sf2/dls files I’m not sure myself, since I’m pretty new in romhacking too.
But the .wav files yeah, since the instruments are very simple ‘single notes’ it would be significantly lighter on the space than trying to import a .wav music directly.
And when you go to the instrument list & replace one of them (your best bet is the ‘Dummy’ instruments on the list; all of them are that one sharp midi noise since they don’t have any sound file actually), FEBuilder itself can compress the .wav files for you in a new window.
Other than that, your best bet to learn more would be to checkout the guides in here about music insertion, these two right here should help you with what you are looking for: