Sounds like the network/MP3 part of it is working correctly, and that the trouble is somewhere in the audio output stages.
If there were problems with XP or the server, you wouldn't even be able to browse and select MP3s, so the problem is unlikely to be with the server.
Is the volume turned up? (Sorry had to ask that.
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Can you describe in more detail how you're connecting the player to your speakers? Also, I don't remember whether this model has a headphone jack. Can you hear anything on the headphones?