After palying around with it for a couple days now, I finally figured out what the problem was.
I noticed that Arts server was on, and decided to turn it off, and try playing music on xmms, and mplayer. Once I did that, xmms, and mplayer worked perfectly.
My problem now is that once arts is off, I can't hear the KDE system notifications, you know the sounds that come up when you minimize, or maximize windows, and so on. It isn't big problem, but I would rather have everything work
What I did was set the Autosuspend if idle option to 1 second, so this way my xmms and mplayer don't need to fight the Sound Server for access to dsp.
But is there any better way to do this? or is the only way? Basically what I am asking, is how can I have both xmms & mplayer work, and still have my Sound Server on?