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Is this just another mindless IE bug? Is it a macromedia bug? Is there a way to get my flash audio to start playing in IE before the file is finished downloading?
Have you specifically 'told' Flash that the mp3 is to be streamed? Unless you add some extra tools to do this Flash will wait until it has all of the mp3 and then begin playing. There are a couple of tools that help you to build this like Boomer from Crazy Ivan Productions, and MP3 Sound Stream. Both of these are tools which create the SWF independently of Flash.
Macromedia Developer Home have a tutorial here [macromedia.com] about streaming audio using Communication Server.
HTH