Thanks for the quick reply.

Ok, it is set correctly. This is the output of the command.

Code:
 [root@server ~]# /usr/local/bin/mencoder /home/userdir/public_html/video/dream_kelly_on_bed.wmv -o /home/bolek/public_html/video/1.flv -of lavf -oac mp3lame -lameopts abr:br=56 -ovc lavc -lavcopts vcodec=flv:vbitrate=500:mbd=2:mv0:trell:v4mv:cbp:last_pred=3 -srate 22050 -lavfopts i_certify_that_my_video_stream_does_not_use_b_frames
MEncoder 1.0rc1-3.4.6 (C) 2000-2006 MPlayer Team
CPU: AMD Athlon(tm) 64 X2 Dual Core Processor 4200+ (Family: 15, Model: 75, Stepping: 2)
CPUflags: Type: 15 MMX: 1 MMX2: 1 3DNow: 1 3DNow2: 1 SSE: 1 SSE2: 1
Compiled for x86 CPU with extensions: MMX MMX2 3DNow 3DNowEx SSE SSE2

MPlayer was compiled without libmp3lame support.
-lameopts is not an MEncoder option

Exiting... (error parsing command line)
It appears the problem is that "-lameopts is not an MEncoder option"

Just to eliminate the question, lame is installed.
Code:
[root@server ~]# which lame
/usr/local/bin/lame