Sansa Fuze and .mid files

Can the Sansa Fuze play .mid or .midi files?

No. When Rockbox will be available for Fuze you will be able to play midi files.

For the time being, just use something like FluidSynth or TiMidity++ to “convert” your MIDI files to WAV, then encode them to whatever compressed file format you prefer (MP3, OGG, FLAC).