I use Winamp and LAME.
I'm not sure about LAME vs. SCMPX. I started using LAME when it first came out, and it's worked well for me ever since, so I've stuck to it.
As for the VBR thing, the reason people use it is to get maximum quality for minimum hard drive space. VBR encodes selectively, meaning if there is a part that needs high bit encoding (bigger file), it'll do just that; however, if there is a part that doesn't need high quality encoding, eg. silence, it'll use a low bit-rate to encode that section. You can kind of compare it to a reverse compressor.
As you can see, the biggest benefit of this, as opposed to absolute bit rate (ABR) encoding, at say 192 kbps, is that if your track has lots of parts that don't need much encoding, ABR will use 192 kbps, while VBR will go as low as possible without screwing up. Similarly, if the upper encoding limit on your VBR settings is as high as say 256 kpbs, then the parts that need high encoding will be encoded at 256 kpbs, while 192 will be 192 throughout.
For players, I think they all handle most formats. There's a pretty good chance that you won't even be using more than 3 or 4 formats of audio, so you'll be fine with either one. I personally prefer winamp (version 2.x) because it doesn't use very many resources (the least of all the players, I think) and does it's job well while providing good, usable features (eg. saving playlists, plugin capabilities, etc. etc.).
Hope this helps.
