This is a rather complicated problem:
I have XMMS with the 'CD Audio player' and "CD Read", when I read a track from any cd, it plays correctly... But causes my internet connection to be extremely slow(500 bytes/s maximum).
I tried to disable CDDB, but this doesn't seem to be the problem...

Another thing: when I use 'Analog' output, instead of 'Digital Audio Extraction' output, my connection works just fine!
Only itch is: I get now sound from 'Analog' output...

As said above I have tried using 'cd Audio player', and 'cd read'(separatly of course), but same problem...
Also, I've tried using 1.2.7 and 1.2.8pre1

Hmmmm... I would suspect that the digital processing is too much overhead for your system to handle. It might also be a latency issue between your nic and your sound card.

did you install some plugins from places other than xmms.org......or that didnt come wtith your distro?.....

I know from experience some plugins that are available for xmms (at certain places) are corrupt....

No, all the plugins come from xmms.org.