Update: This problem persists after an upgrade to Drupal 5. I just ran into a weird issue with a Drupal 4.7 installation on Centos 4 with PHP 4. In the Audio module I had to comment out the "ob_end_clean()" line in the audio_file_transfer function to get downloads and streaming to work. I tried this on two similarly configured servers and got the same issue on both. Odd. Dec 13, 2007 postscript: The Audio module stopped working after an upgrade to a newer version of Drupal. I found an issue that contained a followup with a fix for the problem.

The views_bonus audio_playlist.inc also needed a similar hack. Modify as below to fix: 
  $url = url($flash_mp3_player . 'mp3player.swf');
# Mike hack
#  if ($options) {
#    $flashvars = drupal_query_string_encode($options);
#  }
foreach($options as $k=>$v) {
$params[] = $k."=".$v;
}
$url .= '?' . implode('&',$params);