Startup with
/usr/bin/icecast2 -b -c /etc/icecast2/icecast.xml

That file looks like this, please adapt your parameters.
This is a real working example on a machine with an AMD Athlon(tm) 64 X2 Dual Core Processor 4400+ and 2GB

#######################################################
# The server the clients are listening to
#######################################################
<icecast>
    <!-- Location and admin are two arbitrary strings that are e.g. visible
         on the server info page of the icecast web interface
         (server_version.xsl). -->
    <location>DE</location>
    <admin>webmaster@kiste.local</admin>

    <limits>
        <clients>10</clients>
        <sources>2</sources>
        <queue-size>524288</queue-size>
        <client-timeout>30</client-timeout>
        <header-timeout>15</header-timeout>
        <source-timeout>10</source-timeout>
        <!-- Same as burst-on-connect, but this allows for being more
             specific on how much to burst. Most people won't need to
             change from the default 64k. Applies to all mountpoints. -->
        <burst-size>65536</burst-size>
        <!--
        <max-bandwidth>100M</max-bandwidth>
        -->
    </limits>

    <authentication>
        <!-- Sources log in with username 'source' -->
        <source-password>SAGICHNICHT</source-password>
        <!-- Relays log in username 'relay' -->
        <relay-password>SAGICHAUCHNICHT</relay-password>

        <!-- Admin logs in with the username given below -->
        <admin-user>admin</admin-user>
        <admin-password>PSSSST</admin-password>
    </authentication>

   <hostname>kiste.local</hostname>

    <!-- You may have multiple <listener> elements -->
    <listen-socket>
        <port>8000</port>
        <bind-address>192.168.123.45</bind-address> 
        <!-- use <shoutcast-mount> in here to implicitly define port n+1 -->
    </listen-socket>
    <fileserve>1</fileserve>

    <paths>
        <!-- basedir is only used if chroot is enabled -->
        <basedir>/usr/share/icecast2</basedir>

        <!-- Note that if <chroot> is turned on below, these paths must both
             be relative to the new root, not the original root -->
        <logdir>/var/log/icecast2</logdir>
        <webroot>/usr/share/icecast2/web</webroot>
        <adminroot>/usr/share/icecast2/admin</adminroot>
        <alias source="/" dest="/index.html"/>
    </paths>

    <mount>
    <mount-name>/stream</mount-name>
    </mount>

    <mount>
    <mount-name>/exp</mount-name>
    </mount>



    <logging>
        <accesslog>access.log</accesslog>
        <errorlog>error.log</errorlog>
        <!-- <accesslog_ip>0<accesslog_ip> -->
        <playlistlog>playlist.log</playlistlog> 
      	<loglevel>3</loglevel> <!-- 4 Debug, 3 Info, 2 Warn, 1 Error -->
      	<logsize>10000</logsize> <!-- Max size of a logfile -->
        <!-- If logarchive is enabled (1), then when logsize is reached
             the logfile will be moved to [error|access|playlist].log.DATESTAMP,
             otherwise it will be moved to [error|access|playlist].log.old.
             Default is non-archive mode (i.e. overwrite)
        -->
        <!-- <logarchive>1</logarchive> -->
    </logging>

    <security>
        <chroot>0</chroot>
        <changeowner>
            <user>icecast2</user>
            <group>icecast</group>
        </changeowner>
    </security>
</icecast>


#######################################################
# the streamer:
#######################################################
We feed in a stream  with ezstream, which seems to be the only program one could configure in a time shorter tahn a humans life:

  ezstream -c ezstream_mp3.xml 2>&1 >/dev/null
 

#######################################################
# This is ezstream_mp3.xml:
#######################################################

<!--
   EXAMPLE: MP3 playlist stream WITHOUT reencoding

   This example streams a playlist that contains only MP3 files. No other file
   formats may be listed. Since ezstream will not be doing any reencoding, the
   resulting stream format (bitrate, samplerate, channels) will be of the
   respective input files.
 -->
<ezstream>
    <url>http://kiste.local:8000/stream</url>
    <!--
      If a different user name than "source" should be used, set it in
      <sourceuser/>:
     -->
    <!-- <sourceuser>mr_stream</sourceuser> -->
    <sourcepassword>PSSSSSSST</sourcepassword>
    <format>MP3</format>
    <filename>/files/Musik/random.m3u</filename>
    <!-- Once done streaming playlist.m3u, exit: 1 or not: 0 -->
    <stream_once>1</stream_once>
    <!--
      The following settings are used to describe your stream to the server.
      It's up to you to make sure that the bitrate/samplerate/channels
      information matches up with your input stream files. Note that
      <svrinfoquality /> only applies to Ogg Vorbis streams.
     -->
    <svrinfoname>Radio Braindead</svrinfoname>
    <svrinfourl>http://kiste.local:8000/stream</svrinfourl>
    <svrinfogenre>PrognJazz</svrinfogenre>
    <svrinfodescription>Yeah</svrinfodescription>
    <svrinfobitrate>256</svrinfobitrate>
    <svrinfochannels>2</svrinfochannels>
    <svrinfosamplerate>44100</svrinfosamplerate>
    <!--
      Prohibit the server to advertise the stream on a public YP directory:
     -->
    <svrinfopublic>0</svrinfopublic>

</ezstream>

######################################################

Hope, this helps, it has been running for years now and still does with a long playlist of actually 700 pieces - all mp3/256 
Autoconversion eats up CPU, dont try it  below a I7 with ssd and 4GB

grz, Wuffel