I have the same problem too.
If I'm guessing right then u have continuous play in XMMS. Have you also
enabled sound alerts in GNOME?
Or are you running Gaim,Yahoo Messenger with Sound Alerts.
What happens is the sound alerts get buffered and when a song ends in
XMMS, the sound alerts get played (new mail,buddy in Gaim). At this
point XMMS wants to play the new song queued in the playlist.
As the sound device is busy with the alerts, it gets displayed that "No
sound device present/ Select the right output plugin".
Unlike Windows, which enables two different sound programs to make use
of the sound card, Linux *i think* performs a hardware lock on the sound
device and enables just one device to use it.It however queues and sound
files to be played which get played after the device becomes "free".
Just turn off any sound alerts you have, and the problem will go away.