i've searched around the threads both in here and alldroid.org and i can't seem to find a solution to this issue other than going back to Eclair.
after upgrading to Froyo i noticed that streaming audio sound like utter and complete crap, using pandora, lastfm etc. i keep backups after every upgrade and after a long restore session of every backup i've found that it started with froyo, i used an Eclair rom and updated Pandora to the last release thinking that the issue could be with Pandora (yes i did change the Pandora settings to high quality and streamed using Wifi and 3G), well it wasn't. at this point i thought the issue was with every sound that froyo played back, so i hooked up my Droid to my home theater (because the phone speaker doesn't work for troubleshooting audio issues) and noticed that the issue is only with streaming media, local media inside the SD card plays perfectly.
so to review:
-there's an issue with Froyo streaming audio
-Pandora works fine (on Eclair with the latest pandora update)
-local media works fine
at this point i'm at a loss other than waiting for Pete to figure something out, unless someone has any ideas.