Awesome work man! To make it fully Google Instant, you would want to run the query against the first result in suggest. For instance, if you type in "la" you would get "lady gaga" instead of "L.A". Keep up the great work. :)
Hm. I am not sure if that's possible through Apple's API. I will take a look.
Though not specific to music (and would have mostly non-music suggestions), you could hit suggestqueries.google.com with a jsonp-formed request. (maybe throw "music" in front of the typed query or something to apply filtering).
That's a good find. Though I don't know if Google's suggestions will fit into Apple iTunes search.