So the problem with the Model 1 that the mixing cable is trying to solve is that the expansion port on that model has audio input pins, but no audio output pins. Now strictly speaking, this is sufficient if you just want to use the MD1's headphone jack (stereo) or A/V out (mono), but in addition to the analog audio circuitry not being amazing (though honestly the MD1 is much better than the MD2 here in general) it also imposes a fairly aggressive low-pass filter. This is rather undesirable for 44.1 kHz CDDA. As you note, the mixing cable allows the RCA outputs to be mixed on the CD hardware side which works around this issue.
On the MD2, they added audio output pins to the expansion port in addition to the existing audio input pins. This allows them to achieve the same effect with no mixing cable.
On the MD2, they added audio output pins to the expansion port in addition to the existing audio input pins. This allows them to achieve the same effect with no mixing cable.
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