I agree with you on the codec stuff. WMP should be able to play: RealAudio/Video, Quicktime (without installing the program from Apple) and Ogg Vorbis.
I know for the encoding part of MP3 that you have to pay for it, but there are other company's like Creative that still give their player away for free with mp3 encoding capabilities.

Also fix the crossfading problem when WMP is playing the last song in a list, starts crossfading with the first song and after the last song ends restarts with the fist one.