Ok, to answer the questions in your first post.
kernel version info:
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$ uname -a
Linux dogzilla 2.6.17-gentoo-r4 #1 SMP PREEMPT Thu Aug 10 18:52:53 CDT 2006 i686 AMD Athlon(tm) MP 2400+ GNU/Linux
$ cat /proc/asound/version
Advanced Linux Sound Architecture Driver Version 1.0.11rc4 (Wed Mar 22 10:27:24 2006 UTC).
ALSA version info:
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$ esearch -cI alsa
[ I] media-libs/alsa-lib (1.0.11-r1): Advanced Linux Sound Architecture Library
[ I] media-plugins/xmms-alsa (1.2.10-r2): Xmms Plugin: xmms-alsa
[ I] media-sound/alsa-headers (1.0.11): Header files for Advanced Linux Sound Architecture kernel modules
[ I] media-sound/alsa-utils (1.0.11): Advanced Linux Sound Architecture Utils (alsactl, alsamixer, etc.)
I can't necessarily rule out the hardware mixing issue, but I think it's unlikely. I have an Audigy2, so it should be able to handle just about as many simultaneous streams as I can through at it.

Also, I've never head this issue with XMMS, or any other application that plays audio, only amaroK.
I don't have an asound.conf, but I do have a .asoundrc, if that's what you mean. I use it to setup proper 5.1 mixing:
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$ cat ../.asoundrc
pcm.proper51 {
type route
slave.pcm surround51
slave.channels 6
ttable.0.0 1
ttable.1.4 1
ttable.2.1 1
ttable.3.2 1
ttable.4.3 1
ttable.5.5 1
}
I also have /etc/asound.state, but I'm assuming you don't want that. If you think it'll help, though, I'll be happy to post it as well.
Any ideas?
Also, as I stated above, I've had bad experience trying to run the standalone version of ALSA, so if possible I'd prefer to use the kernel driver, as it seems to simply work (in general) much more reliably for me. Of course, I'd certainly be willing to give it another try for testing. Just let me know.
I'll also work on getting the backtraces information to you. I've already enabled bugging for amaroK, but it didn't tell me anything useful. Of course, that was before you pointed out that the error was coming from alsa-lib.