So, I've noticed that the far superior PoL music that replaced the old HOMM town music is not in the game. Ironically, you can download these songs in the soundtrack when you buy the game, but they arent in the game. Is there anything I can do to swap over to the MUCH better town music from PoL?

Hmmm, are they in the soundtrack? I could only find vanilla HoMM2's town themes in there...
Anyway, I don't think it's possible to swap music in-game (as it doesn't use MP3s), unless there is some explicit way for it.

Yes for HOMM 2 they are tracks 27-32 and have (expansion) in the title

Are you talking about the one that comes with the GOG download? I only have 26 tracks in that. Strange...
UPDATE:I've just downloaded the soundtrack again, and there ARE the expansion town music tracks. They must have updated it some time ago...

I've checked, and it's not possible to change the music to that of PoL.
Like I've said before, I suspect it is due to the fact that HoMM2 is a rare case in which the GOG staff did NOT patch the game to the latest possible version.
Anyway, I +repped your post 'cause without that, I wouldn't have cared to redownload the soundtrack.

Probably it is because of DOS version which GOG sells.
Ditto. +repped him too.

You're probably right...

HoMM2 uses music in the same way as Redneck Rampage does. If you go to the HoMM2 directory on your HDD, you'll see a file called Homm2.gog, taking up approximately 652 MB of space, and a file called homm2.inst, taking up about 2 kB. These are actually renamed BIN/CUE files, containing the redbook audio for the music. The .inst file is mounted as a CD in DOSBox, which then plays the audio off of it in-game.
Since the HoMM2 expansion installed on top of the original game, what music you got in-game depended on which CD you had in the drive when playing. If you had the expansion CD in, you got the expansion music. My guess is that the disc image in the GOG release is the original CD, and so it doesn't contain the expansion tracks. Unfortunately, I can't check this, since the soundtrack download is broken for me. I can download it fine, but half the MP3 files, including the expansion tracks are broken and won't play. I have tried downloading it a couple of times now, and it's the same files that are broken each time, so I think it's a case of a broken file, rather than a corrupt download.
If you want to check the redbook audio yourself, just copy Homm2.gog and homm2.inst to another location (just to make sure you don't mess up the original files), then rename homm2.inst to homm2.cue, and mount it in Daemon Tools. Do not rename Homm2.gog, since the CUE file refers to it by that name.
[EDIT] Okay, the Barbarian and Wizard tracks (original) in the soundtrack work, so I've just compared them to their redbook counterparts. They appear to match, so it's the redbook audio from the original game that's in the GOG release. If you have a working soundtrack download, and you really REALLY want the expansion tracks in-game, you should be able to make a new BIN/CUE image yourself, replacing the original tracks with the expansion tracks.
[EDIT2] I've informed support of the issue (or both issues, rather).

Thanks for your informative post, Wishbone, and also for contacting GOG support!
+repped your post too.

Lets just hope theyll fix it, i think we are MANY homam II fans who prefers the gold edition soundtrack, and as such are disappointed we got stuck with the "crappy" counterparts, if i may say so, well nvtl im gonna dd this thread to favs, and see if GOG team fixes it, when they do, i will download the game, if not im pretty annoyed ive spent 9.99 $ on a game i bought for its music, as thats what i remember best :-)

Wishbone, thanks for your great post! Can you give me idiot-proof instructions for swapping out the music files? I don't want to just muck about in there and mess something up!

I'm surprised to read people saying how much better the PoL music was than the original, because I just can't agree with that at all. Both the original and expansion themes were written by the same people and are in a very similar style, and I think they're all of a very consistent quality too. The only marked differences are that (a) the bass singer changes between the original and expansion tracks (and the original bass was better), and (b) a saxophone soloist is added in the expansion tracks. Normally I don't much like saxophones, but the addition works well enough here.
You can't say that one set of music tracks is 'better' than the other, though; they're just different. I adored the original music and was rather dismayed to find that it changed when I bought the expansion pack; but then I discovered that the new tracks were very much of the same standard as the ones they replaced, so I ended up playing both sets as the mood took me. Anyway, my personal preferences would be as follows:
Knight: I much prefer the original theme, which is fantastic and one of the best. The PoL music is a big disappointment (the least good of the six new tracks), and is just a modified rehash of the win-game music.
Wizard: I simply adore both themes and find it very hard to say which I prefer. They're two of the best themes in the game. NB The original music shares a common melody with the Barbarian town, which is a nice bit of unity that's lost with the expansion.
Sorceress: I much prefer the PoL theme, which has a far more atmospheric and emotive melody. My only point against it is that the soprano isn't in very good voice for this track; she's less good here than in her other appearances, which is a pity (whereas she sounded great in the original Knight track). Interestingly, the original sorceress theme (the one I'm less keen on) was reused for the credits in Heroes V, so Paul Romero and Rob King must have been keen on it.
Warlock: I prefer the original theme, though they're both good. The new theme is spoilt by the rather naff-sounding bass, who sings lower than he can really manage at the start, and just sounds croaky.
Barbarian: I love both of these, and again find it hard to choose between them. The original theme, as noted above, shares an important melody with the Wizard town, which is a nice touch (and it's a really good, memorable tune that I find myself whistling often). However, the expansion theme is the only duet, featuring both singers, out of the dozen town themes, so that's a nice touch too.
Necromancer: Here again, I really like both versions, though I have a marginal preference for the original because it has a 'sturm und drang' character that better suits the nature of the town, whilst the replacement music is less dramatic and is instrumental only. (Not necessarily a bad thing in itself, but I thought the original bass singer suited this town really well.)
So, overall, I much prefer the original Knight theme to its replacement, and I much prefer the replacement Sorceress theme to the original, but for all the others I love both versions and find it really hard to choose between them. On balance I guess that my own preference is marginally in favour of the original music over the expansion music, but they're both wonderful. To say that one set of tracks is vastly superior to the other just seems silly; it's no more than a matter of personal preference because the quality is really pretty consistent throughout. (I speak as a qualified musician.)
Frankly, my own great wish would be for an update to Heroes that would allow it to play the original music when playing an original map, and the expansion music when playing an expansion map, with no user intervention required. (Or at least have that as an option, along with the ability to choose always to use a particular set of tracks if preferred.) That's been my dream for the game ever since the expansion pack first appeared.
By the way, it seems that there's a third official Sorceress theme. I don't know the background or circumstances behind it, but the suspicion is that it appeared on some, but not all, versions of the Heroes II Gold Edition. Unfortunately I don't have a decent copy of this theme on CD, and the only way I know of hearing it is to listen to a pretty poor-quality transcription on YouTube:
http://www.youtube.com/watch?v=x6I0U-UGGBM
It's pretty weird and, to me, far less successful than either of the other two Sorceress themes (the wailing muezzin doesn't do it any favours at all, either). However, I've had it confirmed by Rob King personally(!) that it's actually authentic, so there you are! Three Sorceress themes. As I say, a way of picking the themes you want to use in the game would be a really fantastic addition.

I don't know how many are the people who prefer the new tracks over the old ones; personally, I like them both. Now that I had a chance to listen to the new tracks :-).

I like the PoL ones far better if only because the originals are very MIDI sounding. The vocals are usually pretty equal between the two tracks, but the originals are SO synthy and fake sounding compared to the PoL, at least to my ear.

Uhm, not really. I'm not an expert, I just know it's doable. I can tell you how I'd go about it, but bear in mind that I'm speaking from sketchy experience here, so don't expect too much.
I'll be using Nero Burning ROM as an example, purely because that is the only program I've ever used to make an audio CD, and even that was quite a few years ago. I assume that lots of other CD burning programs can do the same.
1. Copy Homm2.gog and homm2.inst to another location (just to make sure you don't mess up the original files), then rename homm2.inst to homm2.cue, and mount it in Daemon Tools. Do not rename Homm2.gog, since the CUE file refers to it by that name.
2. Using whatever program you find is best for the task, rip the audio tracks from the image in WAV format. If the program works the way I think it should, that should net you 1:1 digital copies of the audio, so as to minimize the loss in quality.
3. Copy the data from the data track to a hard drive. (This is not strictly necessary. You could read it directly from the mounted image, but I prefer to minimize the bottlenecks when burning.)
4. In your burning program, create a new mixed-mode CD project. (If you can analyze the existing image to find out exactly how that is configured, use equivalent settings.)
5. Add the data you copied earlier to the data track of the new mixed-mode project.
6. Add the WAV files you ripped earlier as audio tracks, in exactly the same order as they were originally. When you get to the tracks that need to be changed, swap in the PoL tracks from the soundtrack download instead. (You may need to convert these to WAV format first. Nero has no problem making audio tracks directly from MP3s, but other programs may have). Be sure to get the order exactly right. Now add the rest of the WAVs (minus the old city tracks, of course), still in the correct order.
7. Burn the project as a BIN/CUE image.
The rest is really up to you. I'd advise you to keep a copy of the original image, so that you can always go back if you've screwed something up along the line.
8. In order to swap out the old image for your new one, you can do a couple of different things. Either way, you start by copying/moving your new BIN/CUE files into the game folder alongside the originals. Then you can either:
a) rename the CUE file to "homm2.inst" (meaning either renaming the original to something else, or... You get the picture), or you can:
b) edit the "dosboxhomm2.conf" file. Near the end of the file is a line which reads:
imgmount d ".\homm2.inst" -t iso -fs iso
Simply change that filename to the name of your CUE file, save the .conf file, and you should be good to go.
Whew! I know I started by saying "No, not really", but it seems I did it anyway. Still, I haven't actually tried this, so your mileage may vary.
On a side note, I haven't heard a peep from support on the issue yet. 10 days without as much as a "we'll look at it" seems like longer than GOG usually take to get back to customers.