Pretty clever, actually...
I think there are a few things that could be definetely improved upon, however:
Like DarkHabit said, you should add some sort of animation as well. It wouldn't necessarily have to be an equalizer, either, just have stick figures or something dancing while music plays and not while the music is off- It's be like, 5 lines of code or so? As opposed to a full equalizer that is. Hell, skip the code even, just make a smiley face jumping up and down! XD lol
Have a list in the center (or on a seperate pane or something) that can at least do a search of common sites containing music (e.g. Myspace, Launchcast, anything of that sort) and then show the ID3 tags (just the name - and only if they have them of course), and let you select the music (in the early stages it could just list the exact link and the user can copy and paste it or something, not sure if that would be exactly easier or not though) and play it.
With the above system, I'm not sure if it would be illegal or not but you could also add a "DownLoad" button, to save the tracks to the user's computer.
NONETHELESS, a good system and concept. I don't know too much actionscripting when it comes to getting URL's and such, but I think you could have done a tiny bit more with this =)
An 8 for effort and concept!