Chizzy,
I do have it working now, but cannot say with certainty what was causing it. I DO know that slasharguments had to be turned off. It will never work unless they are.
You didn't say if you even have a player progress bar displaying or not. My problem initially wouldn't even display this bar. But once it did, the audio wouldn't play and there was no time display as to how long the file was.
I ended up reinstalling Moodle. BUT, a straight install into an existing Moodle database never worked. Instead, I found out that I had to install version 2.0.3 to a fresh database, THEN install 2.1.1 using the database created under 2.0.3. When I did it this way, everythign started working. However, if I tried installing 2.1.1 directly, and bypassed the 2.0.3 step, it wouldn't work correctly.
I really think that the problem stems from a corrupt database. So, start fresh, and once you get it working, then restore courses from an older version. Worked for me!