The advantage of .wmv files is the small size - I made some tests and typically one song is 100% in MPEG2, 70% in AVI and 50% in .wmv - so you can save some harddisk space by using .wmv.
I am using the AVS Video Tools (
http://www.avsmedia.com/VideoTools/index.aspx) but any other converter will do the job in the same way.
There is one disadvantage with .wmv which I figured out, so better try before with your system:
My system is a laptop and a flat screen, the laptop for the Karaoke Software (Karafun) and the big screen for the singers text. The .wmv files only plays on the monitor which you define as screen number 1 - regardless if this is the laptop or the flat screen.
Of course, you can run the Karaoke Software from screen number 2, but any error message (e.g. File not found) will show up in screen number 1 - which is not really good.
This only happens with .wmv files, not with .mpg , so better try with your system if you can see .wmv files on your singers screen, before you convert all your media.
Wolfgang