I wrote some patches to enable playback of FLAC files in Android.
Limitation: The current implementation only accepts 16-bit FLAC. I plan on adding 8-bit and 24-bit (dithering to 16-bit; the Android platform doesn't appear to support 24-bit audio).
If you want to enjoy FLAC but not necessarily build Android from source, cyanogen has included it in the CyanogenMod ROM for the G1 as of version 3.9.3.
It's not officially included in the Android distribution, so to enable
it, you'll need to create or add this to your
<?xml version="1.0" encoding="UTF-8"?><manifest><remote name="github" fetch="git://github.com/" /><project path="external/flac" name="kruton/android_external_flac" remote="github" /></manifest>