Out in freewareville --- in that seemingly infinite somewhere on the web, there's a decent little sound editor called Audacity. I haven't explored all its capabilities but it converts wav files to MP3 and you can manipulate files and music tracks to a degree. I guess it all depends on how much time one wants to devote to playing mouse maestro in order to preserve as much of the original quality as possible.
Pretty much. I haven't used Audacity, so I can't speak to the quality of it, although I have heard good things. For cleaning up the LPs we were digitizing, we used Diamond Cut Pro, which is definitely not free, but the results are second to none.