I resolved this by accident.
It turns out it was Firefox settings that were broken.
Apparently, when the mplayer-plugin installed (finally) it messed up the Firefox preferences in such a way the the default player for that mime-type appeared to be missing...
When revisiting the mplayer-plugin website they have a test page in which you can test your installation...
http://fredrik.hubbe.net/plugger/test.html
For some reason I clicked to test mp3...Firefox as usual said the plugin was not there (I uninstalled it!) However below the icon they have the text "Click here to test this mime-type in the entire frame" which is nothing more than a link to the mp3 file...Firefox popped up asking me what application I wanted to use to open the file...apt-get install xmms....and chose xmms...
There is a checkbox - Do this automatically for files like this from now on"
If you check it an additional message comes up in the pop-up - "Settings can be changed in the Downloads section of Edit>Preferences"...
After looking through KDEs preferences for a minute or two it dawns on me that the meesage is from Firefox...duh! It's been Firefox all along! Bah.
I'm still confused as to why the mplayer-pluin configure make make install would break that preference in Firefox but I note the mplayer-plugin is ...well a plugin ...for Mozilla....
I guess it removed my preference and replaced it with nothing for some reason....but I suspect it chose a non-existent path instead...