I never use extract.exe, it's a piece of garbage. Your best bet is to make a full ISO file with empty space where the CDDA tracks were.
Basically, the formula is this:
1032499200 - (track03.iso + track06.iso)*
*track06.iso is the last track, could be track08.iso etc. instead.
Now make a dummy file of this size (use newfile.exe or something)
Then copy /b track03.iso+dummy.bin+track06.iso c:\newpath\track03.iso
Now you have a full sized iso with the CDDA section filled in. Now use
isofix track03.iso 45000
And then open fixed.iso with ISOBuster. This allows you to make a sorttxt.txt also which preserves the sort order.
I wrote tools to automate this but they are pretty much designed to my own setup so there's no point in providing them. I could clean them up and make them more flexible but couldn't be bothered really.
For Shenmue 1, you can and should actually keep the CDDA tracks. Use my GDDA patcher for this, because cdda.exe fails. This gives you the cool music in the start, and the music track on the motorcycle ride back (missing on most rips, which is terrible). To make it all fit you need to use dc_afsshrink (or use my shrinker which can automatically search subfolders). You also need to hack the LBAs of the other files such as HANGON.EMU (I think) and so on. Passport disc needs some major downsampling of the video files.
Anyway, have fun. Shenmue was a big task to backup for me, but Shenmue II was much worse, considering I preserved as much of the free quest speech as possible! Unlike a certain release group who shall remain nameless
So I get to play the best backups and keep my originals safe, hehe.