In order to stay out of any trouble with Thomson, who charge royalties (75 cents per unit, or a one-time fee of US$50,000 – $60,000) to anyone who develops MP3 encoding or decoding software, we’ve removed MP3 playback capability. Sorry.
Finding out that XMMS no longer plays MP3s is like finding out that your set of flathead screwdrivers will no longer actually turn screws, but still can be used to open cans of paint.
Luckily, there’s a quick fix. This site has an RPM that restores MP3 playback capability to the versions of XMMS that come with Red Hat versions 8 and 9.