There is a python script, tab2opf.py, for tab delimited dictionary files, see
How to create your own mobipocket dictionary for any language:.
The LIT Encarta dictionary converted to MOBI works as a conventional dictionary (open the ebook, navigate to the page with the definition), but does not support lookup because it does not have the needed MOBI tags. I don't know if MS Reader even has a lookup capability, but if so it is keying on different tags in the file.