I second the vote for SongPlayer, you can buffer big chunks of the file into RAM which makes it pretty skip-free unless you have heavy load for 30 seconds or however long you set the buffer to be. I could usually browse while playing MP3's and not have it break up unless I visited a really complicated site.
BTW I just set up my 1200 again and for some reason SongPlayer won't play any MP3s; it loads them and looks like it's going to play, but it just sits at the start of the file and doesn't do anything. Has anyone else run into this??