After a lot of googling and research and a few sleepless nights and damn hard work, I figured how to build a streaming mp3 server in vb.net using a variation of the shoutcast protocol, tweaked slightly so the streams should download from a web browser. The good news is I have saved you all the hassle of figuring this work out your self. So if you're fatigued trying to do this in .net you've reached a good place. The project is a visual studio .net 2003 project and in vb.net. It includes everything you need including the lame encoding exe, bass dll's and my own vb.net bass library (including source code). It's not commented or perfect, but it should save you an infinite amount of work if your trying to do something like this.
Besides from the source code, its actually a pretty good application in itself, and with a few clicks you can stream your mp3/ogg audio files over a LAN, WAN or the internet.