So this thread doesn't really have a point, except insofar as to collect some knowledge about the way that magic works from a "magical energy" standpoint, analogous to thermodynamics for typical energy. I'm also going to try to tie the two together, but the links are tenuous.
First off, let's start with the obvious: without the existence of a magical form of energy, magic blows conservation of both energy and mass right out of the water. Basic combat spells like Manabolt or Powerball aren't a problem (Powerball even increases entropy), but all of your elemental manipulations produce matter or energy, to say nothing of Create Food, shapeshifter form-changing, etc. etc. etc.
Now, prolonged magical activity produces Background Count. Background Count generally reduces the useful magical work that can be done; there's a clear analogy here to a heat engine and the decline in source temperature differential. We then have an easy patch for thermodynamics—magical energy exists and can be converted into other forms of energy, consuming the magical energy in the process.
There are a few holes here, some easily explained and some less so. I'll start with the easy one: where does the mage come into this? Why doesn't magic (usually) spontaneously convert to other forms of energy?
The easy resolution is to interpret the mage as a conduit or catalyst. This serves to explain why Drain is so unpredictable; the mage isn't (in this interpretation) so much actively forming and manipulating the magical energy (I'll call it "mana" from here on) as directing it and letting it flow through them. In this case, then, drain represents the consequences of failure to let mana flow through; it instead remains with the mage and causes injury (maybe this is mechanic for the combat spells? But that's neither here nor there.). This is close to canon descriptions, though they imply a bit more of an active role for the mage.
Trickier is the fact that this implies that Background Count is caused by depletion of mana. Background Count is Horror-Taint in Earthdawn, but the Horrors require a certain magic level to exist here, and they certainly don't seem too bothered by astral corruption. Perhaps then the primary effect is not expenditure of mana but increase in mana entropy; some mana must be converted to other forms of energy, but that need not be the primary effect (again, see heat engines).
Hardest to resolve is why matter is so easy to create using Mana. Create Food can, in the hands of a competent starting PC mage, reliably create enough matter to feed five or six adults with only +1(S) drain and no particularly unusual creation of Background Count. The spirit Wealth power does likewise. Mana's "exchange rate" with matter must be proportional to that of other energy, otherwise you get infinite energy by a three-way cycle. There's really nothing I can see to address this that isn't patched out of whole cloth, and in a way that adds nothing to the world.
Other things to consider: in this formula, Cleansing ought to take energy (it reduces magical entropy), as should Filtering which would be interpreted as localized Cleansing (you Cleanse the mana you're using right now rather than the whole area—presumably a win because whatever energy you use can't be converted into what you want the way mana can). On the other hand, Cleansing has severe Drain—I'm not sure where the energy comes from if the mage resists it all, but it's high enough that it's only moderately unreasonable for the mage to be the source of the energy.
Aspected Background Count is also tricky, and I don't have a solution that isn't epicycles.
Anyway, that's all I can think of at the moment.
~J