I'd wait for GSMarena's review of the Galaxy S2's sound quality first, but I think you're on the right track with that -- the original Galaxy S is praised for being right up there with the best of them in audio quality thanks to the Wolfson DAC it uses. In the last four years I've owned a slew of HTC phones and an iPhone 3GS, and the HTC phones all sound really terrible on my Shure SE530s.  The 3GS sounded really good, and I miss it a lot -- I just don't miss iOS, iTunes, or having to stay caught up with the jailbreaking scene to do what I wanted with my phone.  I'm using an HTC Glacier right now (sold as "T-Mobile myTouch 4G", jesus christ) and aside from being an incredible smartphone with a gorgeous screen and awesome aftermarket support via the CyanogenMod community, it's one of the worst catastrophes ever with good headphones plugged in.  I hear a super-loud hiss on my SE530s, but that's just the half of it: I also hear buzzing noises, and faint whirring and screeching sounds when the processor is working hard -- like the kind you'd hear on super old crappy laptops. It kills me that HTC doesn't value audio quality at all, because now I have to eBay this thing and go buy an original Galaxy S for my carrier.

I guess we should count our blessings that a smartphone with a reasonable-quality DAC even exists in the first place.  I'll be joining you on the Galaxy S II train when it launches, provided there's no degradation in sound quality from the first Galaxy S.  The combination of a "proper" AMOLED display (google "PenTile AMOLED" to see why the regular Galaxy S sucks), 64GB possible capacity, and bleeding-edge hardware make the GS2 the only real competitor to the iPhone we've seen.

For playback, I use Music PlayerPro (http://www.appbrain.com/app/music-playerpro/com.tbig.playerpro) on Android right now, and it works pretty well. Supports last.fm scrobbling and displays album art in a really sensible and attractive way when your music's playing. Supports FLAC if your version of Android does. It's not gapless, but that's Google's fault (http://code.google.com/p/android/issues/detail?id=3461) (and as an avid follower of that very-old Google Code thread, let me tell you that this is starting to get really, really old).  There's a Rockbox Android port in progress.  Can't wait till it's mature enough to be the de facto recommendation.

We don't have Spotify in the States, but they've got an Android app and I hear that it owns pretty hard.

For headphones, you should look at IEMs.  Martin's review of the EarSonics SM3 over at ABi have me dying to try them, but they might be out of your budget.  I got my SE530s for $290 USD when I ordered them three years ago, and felt okay enough about that price.  I think you can find them closer to $200-240 USD now that the SE535s are out.  I'm not a headphone expert by any stretch, but you're probably going to be pretty happy with any of the $200-ish IEMs that people recommend here.

From what I can tell, you only really have two choices - The Galaxy S or the iPhone 4. I had the iPhone 4 and found it pretty OK as far as Sound Quality goes, what I really found great was how easy it slipped into my life. I had a Cowon D2+, which whilst sounding better IMO got left at home quite often due to the fact that I was just too lazy to carry around two devices. I'd personally recommend the Galaxy - I've never extensively used one, but I've heard very good things from friends who live local.

Remember: Sound Quality is not everything in a phone. Not by a long shot. The testament to this is the fact that I've sold my iPhone today and bought an HTC Desire, not because the SQ on the iPhone is poor or anything of the sort, indeed the HTC is meant to sound pretty rubbish. It's that the iPhone is a rubbish phone, mine frequently dropped calls and was generally an unreliable piece. I'm not coming from you from an 'I hate Apple' viewpoint either, I run 4 Mac systems, both at work and at home. I want to like the iPhone but quite honestly I view a phone as a telecommunicational device first and everything else second, when it starts dropping calls and not performing that function, then it's really time to go. You might be different mind.

What I'm essentially trying to say is don't buy a phone solely on sound quality. It might factor in your decision, but it's not the most important thing - buy something you're comfortable with. I don't expect this view to be re-inforced by any other forum members - you are on an audio forum after all.

I swear by IEMs, as does the above chap.

Welcome to the forum - It seems that the natives don't really like the 'suggest some gear for me' approach which is fair I suppose, but this place is an absolute font of knowledge and 9/10 there will be someone who's already asked your question. The search button and Google are your best friends. Don't take this the wrong way - it's just what I've found out during my time here.