Hey - DCMike - did you try launching Sonar with Run As Administrator? It used to be to get Dimension Pro and Rapture to properly complete the registration/authorization process, that they either needed to be launched in stand-alone mode with Run As Administrator, or inserted into a Sonar project where Sonar was launched with Run As Administrator.
I wonder if the MP3 activation/authorization would maybe work the same way. Perhaps you could try launching Sonar with Run As Administrator by right-clicking on the Sonar launch icon and then explicitly clicking Run As Administrator and then trying out the MP3 encoding, or doing the same for Command Center (right click and launch with Run As Administrator).
When Command Center came out, I took I think a couple hours (brain a bit fuzzy on the time needed) to install everything through Command Center, so that moving forward it would be able to manage things, and I set the Command Center launch icon to always launch with Run As Administrator, and all the registration/authorization stuff just worked, so maybe it would help you to do that for the MP3 licensing.
Run As Administrator is NOT the same thing as simply having a Windows User Account that is an Administrator - Run As Administrator grants additional execution privileges that you don't have even if your user account is of type Administrator.
Bob Bone