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Wave isn't impractical. Most compressed audio formats are lossy. The sound is good enough for the human ear, but might not be appropriate for the application.
MP3 is a licensed format and to use it NI would probably have to pay the owners (Fraunhofer, I think) quite a lot of money.
I don't know if you'll find any exposed ActiveX interface for converting mp3 to wave. The more likely possibilities are a DLL or a .Net class. I would try searching Google for DLLs providing this functionality and then see if you can call them in LV.
