The "disc 2" error was something that cropped up in the pre-free-release. I believe they had fixed it in the free release patch, which last I knew was going to be .19, but it's difficult to say whether or not anyone got the thing fully patched before their ISP went down. The information to fix it was on their forums, but obviously, those are lost, too.
Before the patch, you had to change where the game is looking for the discs in regedit if your default disk drive isn't D:\... There are like four entries in Windows 7, which make it a total pain.
HKEY_LOCAL_MACHINE > Software > Microsoft > Microsoft Games > Look around in there
" > Wow6432Node > Microsoft > mektek.net > Set both MW Mercs and MW Editor just to be safe
" > Wow6432Node > Microsoft > Microsoft Games > Same deal
In total, I believe it's 4 entries for Win 7, and fewer to older versions (Vista not included). Of course, like I said, it's difficult to say how far anyone actually got in the download, but if you're messing around with it and run into "insert disc 2" then this is where you should start. Hopefully everyone can get updated and running if/when the servers come back online.
Please be patient with them. It's been a year since they've been trying to get permission from Microsoft, and, as noted, it's an unpaid community endeavor.