Generally speaking, all the DD platforms get their own set of keys, and retail keys (unless the game uses Steamworks or Goo) and especially for old games, aren't recognized by the DD clients. So, basically, you can't convince Steam that you have the game because you can't get it to recognize the key.

On top of that, Steam uses its own directories for games, sometimes has separate Steam-only patches, and in a few occasions mods for games have not worked with a Steam version of the game. Considering that Medieval 2: Total War is a fairly old game, I would guess the chances are not insignificant that if you did get Steam to recognize it, the expansion and the original retail copy wouldn't mix.

Do you have experience with Impulse and this issue? I realize Steam is pretty not compatible with anything that is not Steam, but I got the impression Impulse works since Impulse installs to the actual directory yes?

Nope, sorry, I don't have any experience with Impulse and this situation. Impulse can be set to ask where you want to install the game/app so in theory this should not be an issue (except apparently Sims 3 and its expansion). But retail keys generally don't work on Impulse either, unless it's a Stardock game or it uses GOO/Impulse::Reactor (still not sure on what name they want to settle on). GOO can cause problems with mods, like most recently with Oblivion. GOO/Reactor modify the game executable, but the OBSE (script extender, necessary for many Oblivion mods) was written for an un-modified one. So, basically, any mod that needs OBSE can't work with the Impulse version of the game, unless they found a workaround or a fix by now.

It's cheap on ebay.