Don't remember if this is the default, or had to tweak it.

Now, there IS a catch with mpd on the N900, and that is, if you just use it and play, the sound is very quiet, even when maxed out, maybe this accounts for your intermittent silence.

What I have to do, everytime I start playback, is to click on some sound file in the N900's file browser, AFTER mpd has already started playing. This will bring up the internal audio player, which shows having started to play the song, but it'll not play it, however the sound volume will jump right up, with mpd continuing to play but with the loud volume now.

After this it works perfectly...