Hi,
RazorLame is graphical frontend to LAME, and is not relevant to Subsonic. The important thing is that LAME is installed properly. Have you copied lame.exe to c:\windows?
I suggest you do the following: Install the bugfix release found at
http://www.activeobjects.no/subsonic/download/subsonic-2.5-bugfix3.zip. It fixes a problem with running LAME on Linux, as well as providing more diagnostics.
Then watch the Subsonic log while it resamples the mp3 files. (The log is located on the "Help" page, and can also be found in C:\Program Files\Apache Software Foundation\Tomcat 5.5\logs\subsonic.log) Please post the result here, and I might be able to help you further.
Note that resampling is only supported for constant bitrate mp3 (not variable bitrate).