Which ROM are you using? I do remember one thing now. The mplayer ipk that comes with the shell puts the config files in /home/root/.mplayer . The Sharp ROMs now run everything as the \'zaurus\' user, so /home/root/.mplayer needs to be moved to /home/zaurus/ and owned by the \'zaurus\' user. Run these commands as root if you are using the Sharp ROM:
mv /home/root/.mplayer /home/zaurus
chown -R zaurus.qpe /home/zaurus/.mplayer
Sorry, forgot about that one. It was so long ago that I set it up.