It's been a bit of a rocky transition to pulseaudio in Ubuntu. I know some users are still having issues in Karmic, but it's been working really well for me since about September 1. The week before my audio was a wreck, crashing in fast cycles, not working with firefox, etc...
However, about Sept 1. I did a dist-upgrade. This brought an updated kernel and other changes. Whatever happened, all the promises of pulseaudio seem to be flowing to me. In the screenshot above you can see that I am playing a flash file on and an audio file, and am controlling the volume of each application seperately.
