Thank you for confirming the method works. I am going to mark it as correct answer, so it is easier for people to find it in the thread, as technically it is an answer to the original question.
Unfortunately, the resulting equations cannot be edited not only in MathType; we are also losing the ability to edit them in Illustrator.
For some reason Illustrator cannot deal with PostScript embedded fonts at all. Furthermore, once an embedded font is specified for a text element within an EPS file, Illustrator is incapable of using this font even if the font is installed in the system. InDesign also gets messed up by embedded fonts; this is why we need the extra step with Distiller to package all the rendering into the PDF engine.
I experimented with different settings, but so far I was unsuccessful in finding a way of converting WMF files, using device context that matches rendering of Microsoft Word, and at the same time NOT to embed any fonts into the resulting EPS file.
To summarize, the method works, but resulting equations become uneditable even in Illustrator.