Ok, I played some more and now have it working. No more skipping audio, even when browsing the web!

Using these options:
mplayer -really-quiet -nojoystick -nolirc -user-agent NSPlayer -nomouseinput -ao gst -cache 32 -playlist

These options are set in .sipie/config - this in is where my error lied I was editing the Sipie.py script and the config file's options were overiding the script. Luckily the script developer had some debuging which I turned on and magically it became all too clear my error.

There is no working GUI at this point. I really don't have the time at the moment to make this into a proper maemo package.