If the device is busy then some application is hogging the access to it. Your problem isn't a big one, but it's very common, it seems. The question is to figure out which application it is. You might try a 'ps' with the option that gives all the processes and look for asound or esound, and kill them, then try to play your cd.
Unfortunately, we are reaching the end of my competence, I gave up on Fedora and moved to Ubuntu because of the sound problems and the lack of decent support.
I can only suggest that you try looking at alsamixer, not kmix or any of the graphics ones, and be sure that there is nothing muted.
If you can, try to reboot and start a command line session, no windowing environment, then try the experiment I described above. this might give some clues.
Another possibility, is to try using Gnome instead of KDE. If it works you might be able to figure out why...
Also, try installing mplayer, and using it to play your music. If it works you might be one step closer.
Finally, there is 'alsaconf' which might be able to configure your sound.
I'm afraid that's all I can say about it. For more help, try a post on Fedora forums, or check carefully the skype linux sound set-up guide:
http://www.skype.com/help/guides/soundsetup_linux.html
also, the sound faqs:
http://forum.skype.com/viewtopic.php?t=4489
http://forum.skype.com/viewtopic.php?t=10858
Sorry that I couldn't be of more help, I've had a real struggle myself, but in the end I'm sure you'll get it to work. You're not far from success if the soundcard's test sound will play!
You might contact Futt or Bonbons, on this forum, since they are real experts, not jokers like me :wink:
Good luck,
GF.