ok.. that's helpful - and what does the screen after this look like? (e.g. is variable bit encoding enabled?  what are you selecting for the quality horizontal slider bar?)
 

Here's the screen shot of that:

Try enabling variable bit encoding - and let me know if that does it.
 
Also - what are you playing the MP3 back on?  I remember a while back I had this exact issue, but it only manifested itself when playing back MP3s on a slightly older version of Windows Media Player, but it sounded fine on everything else, even slightly newer versions of WMP on other PCs.
 

One other question - this is the default cakewalk encoder, right?
 
I just noticed in your screenshot it says lame encoder v 3.97 - I'm not in front of my DAW right now, but thought the Lame encoder was different from the one provided by Cakewalk, but I could be wrong.  I'll try to get in front of my DAW tomorrow morning and check what encoder I'm using which came from them.
 

so?

Also disable 64 bit engine 

Sorry I had to get some other things done so I haven't been able to get back to it yet. I will try your new suggestions and see what happens- hopefully tomorrow.
 
I am using the MP3 encoder that came with X2. I'm playing them back with the latest version of ITunes.

Sorry I had to get some other things done so I haven't been able to get back to it yet. I will try your new suggestions and see what happens- hopefully tomorrow.
 
I am using the MP3 encoder that came with X2. I'm playing them back with the latest version of ITunes.

Had a double post