After trying all the suggestions from Roxio and users to fix the MPEG-2 activation error, I found the solution. As it turns out, the problem is not with Roxio software, it is the Sonic Cine Player. It cannot be resolved by simply uninstalling the Roxio software, or running endless registry cleaners (I used two 3rd party cleaners).
After all the uninstalls and automated registry cleaners are done, I did the following (DO THIS AT YOUR OWN RISK!!):
1) take a system restore point
2) Go to Windows/system32 and manually remove dll's with 'Sonic Solutions' company in the file label
3) Go to c:\Program Files\Common Files and delete folders 'Sonic Shared' and 'Roxio Shared' if present
4) THIS IS THE MOST IMPORTANT PART
Run a registry editor and look for 'sonic' (caseless)
In my first scan there were over 100 HKCR (classes) with various Sonic license and MPEG registrations. I DELETED THEM ALL. Be careful though, cause my Intel motherboard has Sonic Focus keys, and Zone Alarm/Mail Frontier has Sonic Wall keys.
I rebooted my machine, reinstalled Roxio Creator 9, rebooted again and Voila - I'm back in business.
I would like to thank Roxio for the help . . . but I cannot . . . nothing I was asked to try worked . . . never-the-less, I am much relieved that I'm back in the game again . . . SHAME ON SONIC and their crappy uninstall . . .