My mp3 are set to 44.1 Hz frequency, 64 Kbps bitrate and Mono channels which is supposed to work.
I tried putting mp3s from other mods into my own for test purpose and it played those sounds in-game so I know for sure that the mod found the files.
I can't think of anything I'm not doing right .. maybe I'll try another mp3 converter to see if it'll work.