Indeed,
Panic 2 is one of the most unique custom campaigns by virtue of having "no relation to anything in the
Unreal universe" as Mister_Prophet put it in his review

i.e., it's a "total conversion" (TC) - I'm providing some history in the last paragraph of this post.
Panic 2 is just such an oddball, like it was made on crack! It's also a better, more fully-fledged implementation of the music-centric themed FPS idea than Zora's
Musica: with
Panic 2, we don't just have music sampling booths, we have musical weapons!
And specifically
M.E.A.N. Barracks is, IMO, the best level in the set, being the most varied and well-rounded one. It really isn't just about the barracks! My favourite part is the disco: love the dancing robots, the musicians on stage riffing on their guitars and the music itself is good too

(even if as with the campaign's other tracks, it's really just a sample of a longer track - the same approach is used in
Musica)
As Semfry suggests, I believe the decision to have the music play through the AmbientSound actor was made in order to "integrate it" with the environment: it's not just some omniscient sound you hear at a perfectly steady level regardless of your position, the music comes from the guitars and the speakers in the game's world.
The "lab" area toward the end of the map is likely the darkest moment of the whole campaign - I remember getting a fright here first time round

with unique "alien scientists" that you don't see anywhere else. This is the only time the usually colourful satire truly dips into horror.
The level of difficulty is still easy - this is where you get the record/CD launcher (technically the AP5000), the best weapon in the pack

In my memory of my first playthrough, things get just about moderately challenging in the last level when you face down the corporate suits.
As for the campaign's story: well, it's obviously a satire of the music industry - the whole thing is a giant metaphor. Of course, there is a
Panic (1) campaign, which is a TC for...
Quake 2! The full title is actually
Atomic Pop Panic: Dr. Atomic vs. The Hitmen and it benefits from an extremely thorough archival document with interviews etc.:
https://dondeq2.com/2020/03/12/atomic-p ... rsion-mod/
Atomic Pop was a business, the "21st Century Music Company" (no less!), which e.g. distributed Ice-T's
Seventh Deadly Sin uncensored in 1999 (with sample songs online including parental-discretion labels, apparently an Internet first). Despite the company's motto, it seems Atomic Pop did not survive the turn of the millennium. In light of this, it becomes clear that
Panic 2 was meant to be both a satire of the major actors dominating the music industry and an advertisement for the company's "alternative" style and offerings.