I've been trying to crack this elusive WMP12 library issue for 2 weeks now. Apparently, all the steps outlined in this forum and others doesn't seem to work for me.
There's a weird solution to this problem that I've accidentally discovered,
Go to Start>All Program>Right-click "Windows Media Player" select "Run as administrator"
And just like that, WMP burst into life and started rebuilding my library. It took a good 3-4 hours for it to complete, but it got there. To my amazement, everything was accounted for
Don't ask me how/why this worked, it just did. Ain't it weird?
Yes, I'm running an account with administrative privileges.
Apparently, WMP just needed a shove in the right direction, am using it now with no issues without a need to run it as administrator.
Tip: If you've enabled "volume leveling" don't forget to "apply media changes" it's under Tools to commit changes you've made to your library preferences.