This is by far my favorite new feature of the new software. I enjoy streaming audio and archived radio programs from a radio station in LA and of course Pandora, but I could never stream those things from my iTunes to my Airport Express. Now, I can! Using my iPhone.
But it seems to be a little buggy. Here is the situation. I have found that if I've already got an audio app or itunes running when I enter my apartment (like on my headphones) and I want to switch to the stereo speakers using my airport express, I have to restart the iphone for the iphone to recognize that I have an express on my wifi. At least that is what I thought yesterday.
It seems, however, that upon waking up this morning things are different. I was playing music from an audio app last night (KCRW if you are curious) and it was working fine. There was that little rectangular icon to the right of my volume slider that, if tapped, shows me my AirPlay options. I stopped the audio last night, did not shut the app, plugged in my phone to charge, and went to bed. Now, this morning, I went back to the app and opened a different music program in the same app to play, assuming that the AirPlay options icon would still be there. It wasn't. I started the music on my iPhone and it began playing, but within about a minute or so, that icon showed up and I could select my Airport Express.
Conclusion: It takes a few moments for the 3GS (not sure about 4) to recognize all the devices on a wireless network. If it fails to recognize any airplay devices and you don't get the icon within a few minutes, then restart the iPhone and you should be ok. Still my favorite new feature.