I havn't had any trouble with mp3s ...soooo...2 thoughts:
1) I am using Limewire 1.8

and 2) I use Macast 1.0 (which I am very happy with in and of itself)

When I download mp3s from limewire, they show up in the shared folder as limewire docs. However, when I select them and drag them into the macast playlist window, they are automatically turned to mp3 files as each song plays. Hope this helps
cheers,
G