AW YEAH.
I finally remembered to bring in some CDs this morning to experiment with this, and it went Very Well.
Experiment #1 was ripping tracks 4 & 5 of Pink Floyd's _Wish You Were Here_ to uncompressed WAV files, then converting those to FLAC (using Audacity for Windows). They're a good reference transition, because there's an unbroken "swoosh" of white noise between the two tracks - crank that up all the way, and if there's a gap, you'll hear it.
Experiment #2 was to rip the whole CD to MP3 (default settings in my Zune client - 192 Kbps), then rename the MP3 files to MPEG3 (it's the OS's fault that you have to do that step, not the FLAC Player's devs'), and copy the files to a folder on my SD card.
Playing the FLAC files through speakers, even with the volume cranked on the transition, I didn't hear a gap at all. With the MPEG3 files, I heard a TINY one - I wouldn't have caught it if I hadn't been listening VERY hard for it. Through headphones, the gap on the MPEG3 files was a little bit easier to hear, and there was a VERY slight hiccup with the FLAC files.
This is a totally acceptable implementation of gapless playback, which is HUGE. I wish this was a paid app, because these dudes deserve to make money for doing this. It's almost embarrassing how much this has improved my day
Get this app. Rate it highly. Good work like this needs to be encouraged.