Sounds like it's time to have your attorney redraft your "contract."
No, seriously, first thing I'd do is to try converting that MP3 to PCM/WAV 48KHz 16-bit or AC3. All MP3's are not created equal. Some seem to work perfectly, while others just flat do not. I use Audition for these conversions, but even the freeware Audacity handles most of the MP3's and better than Encore or Premiere.
Someday, an audio guru, like Neil, will explain to me what is different between the MP3's that work, and the ones that do not. They look the same in most utilities that I've used, but some are just "bâtard" files!
The above suggestion would be
you've read Ruud's link.
Also, as Neil points out the 64-bit OS could be part of the problem. Just like MP3's, some folk get Vista 64 (and even XP-64) to work with the CS3 suite programs. Some do not. It's hit, or miss.
In case the 64bit was an issue I rebuilt the job on another machine this time 32 bit, guess what, no difference, the problem still exists.
I even tried a further edit of the audio file changing them to aif format with little improvement.
Considering that others are having similar problems I think we can safely say that this appears to be a bug in encore. Does it need to be brought to the attention of Adobe?? or does posting here do that automatically.
Is it possible an uninstall and reinstall might resolve this or will it make it worse?