First of all, yes you can burn MP3s to a CD - I've been doing exactly that for a few years now...
The files on my 'gig' CD are ALL MP3s...

I convert them to MP3s (224bps - high quality) from WAV files so that I can fit all of my 60 songs on one CD, and have read in numerous places that the audio quality difference between a WAV and an MP3 is minimal and not detectable to the average person....

I burn the CD at 4x - the slowest and highest quality.

As I said above, I have a very good PA setup...

The SONY DVD (audio out - NOT headphone jack) should output the MP3s at a high quality as well.

So I remain confused and frustrated....