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Just downloaded 3.1 and can't seem to play mp3 files in xmms.
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Hmmm... the default installation works fine for me -- in fact, I'm listening to streaming MP3s through http://www.shoutcast.com right now. As far as I know, there are no licensing issues with it.

Do the sample OGG files work? Perhaps you have a corrupted CD image or the CD itself has a problem. I'm not sure what else to suggest right now.