I've always found that one generation of reencoding is not terrible. And, given the fact that it's not as if it's exceptionally high quality to begin with, I wouldn't be surprised if the difference was unnoticeable. Then again, I wouldn't be surprised if the difference was tremendous.

I would definitely try reencoding it.

I would also think that if this is reproducible, then it's also a bug in the empeg. But it might just be a documentation bug in that they forgot to mention that they don't support MPEG2.5 or something like that. Maybe it's a bug in the ARM decoder. Regardless, there's a bug there somewhere....