It would be nice to know what is actually doing in the MP3 handling, so any firther tests would be welcome
Remember to save off a restore point too!.
My money is on some sort of "multimedia accessory" that either or both of indtalls a dud CODEC or takes over MPEG handling because it "knows best", MP3 being the audio format for MPEG. Anything that messes with the default Microsoft installation of DirectShow as well. (That includes some poorly written plug-ins for Windows Media player).
So - it can be coming from a movie third-party widget as much as a music one. Possibly even a "kewl" screen saver?.
Cheers
Andy