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According to this link the Windows Phone 7 supports the AAC encoded audio stream in the browser and via the MediaElement API as well. We have tested few the icecast streams (e.g. this) it on our devices (e.g. HTC HD7 T9292, with latest updated - ver 7.0 (7392) ), but it does not work either in web browser or via API. The mp3 live stream works fine.
Any clues, why the AAC does not work, even the documentation says it should? BR SteN
Icecast is not pure AAC, in 7.0 you need to strip out the icecast headers and metadata using a custom MediaStreamSource and then feed the raw AAC to the MediaElement.
It looks like from your comments that they may have added native icecast support to Mango.