I've managed to take the music out by the following (a Steam version of the game):
C:Program Files (x86)-Steam-SteamApps-common-Silent Hunter 3-SH3-data-cfg-main.cfg-[Sound] Music=No
However, I've now lost "Torpedo impact!" notification from the sound guy.
I suppose I can eyeball if there is limited danger of reprisal if I hang about to observe the resulting attack. Or listen to the hydrophones for torpedo hits / sinking noises.
Anyway I'll see how it pans whilst in a career patrol.
Hope that helps anyone who wishes to take out the music.