I found a player called andless that will play flac on bugless beast V.9. Player is pretty crude though. Wouldn't want to use it as my full time player.
Success with stock music player and Smoked Glass 2.1!
I'm running the 6.01 Smoked Glass 2.1 ROM that has the FLAC patch. I found this 16bit FLAC file on the internet. I downloaded to my DROID via USB. Renamed the extension to .mp3 and was able to play the file on my DROID using the stock 2.1 music player.
You need a good amount of power to play FLAC files. Even on a PC they require a good amount of power for it to be smooth.
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On Motorola Droid, Meridian player worked flawlessly for FLAC, and is a better player imo than the stock droid one, plays very smooth.
The caveat is that the audio out on basically any phone, no matter how nice, isn't of high enough quality to bother with flac - a high quality MP3 encoding from FLAC should garner you 99.9999% response on even a high end system, simply due to the audio processing not being what it would be on a high quality home stereo or professional level sound card.
That being said, it is nice that the option is there now. Meridian is free, btw.
The only distro I found that works with flac is cyanogen. Bugless beast up to ESE81 has said it supports flac, but i was never able to play them in the stock player. So I'm on cyanogen for now even though its not froyo.
edit: oh ok, i guess with BB it won't show up in the stock player but they play if you open them in a file manager like Astro.