Once you start a stream, it can be accessed with any media player. So when N900 is playing music, start a VLC client on your PC, select open location and tell it to open http://localhost:19780/stream.asf

If VLC can play it, then Knots should be working just fine. And client thinks it's playing because VLC says it's playing, but the actual player can't access it at port 19780. So you get progress bar etc, but not the actual music stream until player times out. So if possible, try closing all software firewalls and virus scanners (disconnect from internet just in case) and test. For some reason these issues seem to only happen on 64-bit Windows, but I've heard success stories too.

EDIT: Oh and forgot to ask, can you get audio / video if you use the browser to play stuff with the Browser profile?