Hmm... another ambivalent user migrated from the platform that "Just works"(tm).
Short answer: That behavior is normal.
Long answer: Universally accepted, full-proof software sound mixing (a la DirectX, DirectShow) is not implemented in Linux by default. You have to use sound applications that use the same "sound server" like aRts (KDE) or whatever (Gnome) for playing all of your files. Otherwise, you get the Three Stooges effect on the sound card input.
Sensing that you have KDE installed (thumbs up) try using Juk for your MP3 playing needs. Or amaroK if you need to listen to radio stations. amaroK is still a developing mess though. There is also Kaffeine (A GUI for Xine) - for listenning of Windows Media streams and MP3 streams. They all will output sound to aRts - no "soundcard busy" issues.
You may find linuxpackages.net usefull on your journey.
Look here ("sound does not multitask" thread)
for more discussion.