Playing MP3's

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FlameDuck

This brings up an interesting point -- if your application itself does not play the MP3, but essentially uses the windows API to hand it over to the operating system to have it played instead, does your application still need a license for the MP3 functionality,

Yes.

or would it be covered by Microsoft's own license?

Microsofts license only covers Microsoft.

http://www.mp3licensing.com/