i had the same problem, but for me it turned out that my iphone had automatically connected to a t-mobile wifi connection that was requiring money... so my iphone was thinking it was connected to the internet, when in fact it would only show the registration page. i just turned off the wifi and connected via 3G and the streams worked great.
you could try restarting your phone. i've found that most of the problems found on my iphone 3G can be fixed by a simple reboot.
also, have you tried re-installing the app? hold down the icon until it starts to wobble, press the x button next to it and confirm delete. you can then go back to the app store download page and re-download it for free with the same user-id you used to purchase the app first time round.
but it sounds like you've got it working anyways. dave:
that's awesome! an dedicated liveatc app would be a pretty handy. one request is possibly to have an visual equalizer when the stream is being played.
why i suggested this is because with all mobile devices the chances of a connection being dropped are fairly high, especially on the move. plus with ATC containing a lot of dead air, it would be easy to determine between dead air and a dropped connection with an visual eq. even with the dead air, there's always a slight sound of constant static which will make the eq wave a little.