Copied my copy of xapilib.lib to XAPI.lib and it compiles fine.
This project is not so simple after all even though libmpg123 does have ASM ready for PPC (but not PPC64). It uses too many UNIX functions that are only half-supported (and Microsoft could not care less). I prefer UNIX functions (POSIX as well), not sure why Microsoft wants to impose their API (including the secure CRT library (fopen_s, etc)).
I have a debug.log file being generated but it seems that _wopen() maybe cannot handle the paths like "game:\\test.mp3" (but maybe this is because of C compiling mode, or some #define that is not present in libmpg123 although it's an Xbox static library project)? And same goes for open and open_s. I didn't enable secure CRT for libmpg123 but I tried to use the functions and they still didn't work. (Also, I got tired of switching my flash drive from my PC to 360

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I have the source if anyone is interested in this. My plan is really to look at libmpg123 as its an excellent decoder for many platforms and just make a good MP3 decoder lib for Xbox 360/PPC64, optimised for 360 and ready for XAudio2 using the 360/Windows API. PM me if you are interested in helping with this effort.
Mainly I'm looking forward to finally having some multimedia homebrew on the 360. So far, it seems nothing much yet. But it's okay, it's tough to do.
Porting mplayer has the same problem as libmpg123 (and it even uses that lib for MP3s), which is the dependence on Microsoft's support for the C library and POSIX functions (some C99, which Microsoft barely supports; and POSIX has very little support other than _underscore functions that do not always do the same thing). But regardless, I'm sure the open source community won't mind a few #ifdef _XBOX >= 200 patches to make good things for the 360. And hopefully in the near future with a FREE compiler. The DX9 acceleration code for mplayer is already present AFAIK. So, that might be something I'll be looking into soon.