Yeah, you should be able to rip music from any music disc you put in there. I don't think it works with a data disc of music (ie 700 mb of music crammed onto a disc, not in audio format) so you'll probably have to do it the slow old fashioned way.

Though it's probably more worth your effort to set up the network, since then you could play Custom Music during any game you play or on the dashboard or whatever you're doing.