It will not save as MPEG. Go into Format and change to PCM and then save. Unless of course you are running CE 3.0. I have the same situation using W2K.
Try installing the latest windows media player and report if that helps.
I got this error when I recorded audio for a db on 1-17-20 using W2000 and I can record and play it back but when I hit the ok button I get the error Failed to open acmStream and the audio says PCM... and the Save as says MPEG...
Do I need to change something or am I missing some files on my laptop ?