Is an iPhone app against the iOS T's&C's?
First time in a while I got a warm fuzzy for having an Android device.
Despite the Flash requirement for uploading, they're already doing non-Flash playback. I don't have Flash installed on my desktop and playback works great.
Seeing as Safari has had background audio support since before it was granted to third-party apps, the web UI would be a decent stopgap in lieu if a native iOS app.
Here's hoping it's just a bug!