As a former member of the JLayer MP3 Library, I am sure that he does not make WAV for MP3 - just playing MP3s and converting to WAV. (I spent some time optimizing the decoder :-)
As for the added files (and, possibly, other operations), it is usually better to perform editing operations using an uncompressed format and compress at the end.
I think that the specification allows you to combine mp3 files, since they are a series of frames, but the behavior can vary from player to player.
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