Hi Michael, the way I'm reading it, you need a mechanical license just to record a cover, doesn't matter if your gonna sell it on hard copies or downloads.

"Do I need a mechanical license?

If you are manufacturing and distributing copies of a song which you did not write, and you have not already reached an agreement with the song's publisher, you need to obtain a mechanical license. This is required under U.S. Copyright Law, regardless of whether or not you are selling the copies that you made."

(see the last line, what ya think?)

http://www.soundclick.com/louistwinn

"If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however measured or far away." Thoreau