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At the moment, reloading the Terms of Use page randomly gives either the old terms or the revised ones; I'm going to give them the benefit of the doubt and assume that's due to propagation delay between servers in their cluster.
I'd like to say a few words about pricing. The prices of US$0.99 per track, US$9.99 per album are high. They're pushing the limits of how much I think this type of service is worth. However, I think they're acceptable for several reasons.
We can argue that downloaded music isn't worth as much as music on CD. Some amount of value is lost due to lossy compression; also, there's inconvenience and possible expense involved in downloading and storing the files. If you want to create an actual CD (burn, print out, etc.) then the labour involved will be nontrivial and the result substantially less good than a commercially manufactured CD. For those reasons, it feels like buying an album for download shouldn't cost as much as buying it in the store. US$9.99 is just a little less than CDs cost, especially CDs from no-name artists like you will find on Audiolunchbox. I don't think it's absolutely too much, but it's close, and I think a lot of people will consider it too much.
It seems highly probable that artists are screwed by this system almost as badly as by the existing CD business. That could be a reason to boycott it.
On the other hand, it's possible to argue that downloaded music is worth more than music on a CD. What I'm going to do with a CD I buy is rip it, encode it, put the disc on the shelf and seldom look at it again, and listen to the encoded files on my computer - so the product I actually use is the encoded file that I could have downloaded. Ripping it, encoding it, and putting it on the shelf have a non-trivial cost too, especially if I'm Joe Average who is maybe not so adept at doing that correctly.
Much of the music on Audiolunchbox is obscure, but that's partly (we can hope) a temporary thing, a function of which labels they were able to make deals with; and obscurity may actually increase the value, because there is music on Audiolunchbox that, if I wanted to buy on CD, I would probably have to get mail-order or travel to Toronto for or special-order it from a local record store or something. Downloading it off the Web is a whole lot less annoying, and that's worth money.
Then there is the huge factor of buying single tracks. With something like the Clancy Brothers, there are 24 tracks on the album and some of them are better than others but all of them I'd consider worth listening to. Paying US$9.99 in that case seems like a good deal. The same is not true of many of the more recent albums out there. I have CDs in my collection from before I started my MPAA boycott, on which there are just one or two tracks I really like (and for which I bought the album). The per-track price that I paid in such cases comes to several dollars per track, and US$0.99 looks pretty good by comparison. That gets tricky, though, because I may not have any good way of knowing which tracks I'll like. As I said, Audiolunchbox really falls down on giving you any way of shopping for music - its use is to buy the tracks once you know what you want.
On the third hand, the price I pay ought to feel like it's commensurate with the cost of providing the product or service I'm paying for. Buyers want to pay marginal cost ("the cost to make one more") rather than fixed cost ("the cost to make the first one"). That criterion is a huge problem in the case of music, which has a huge fixed cost and very low marginal cost, and it's even worse for downloaded music where the marginal cost goes even closer to zero. (On peer-to-peer it is zero, which is why they need to do a damn good selling job to convince me to pay for peer-to-peer.) If I give a lot of weight to this factor, then I'm going to be pretty unhappy about paying more than US$0.10 per track, because that's how much it feels like it should cost them to provide the service on a marginal cost basis.
Some more factors: I believe in voting with my wallet, and I'm willing to pay a premium for a service that's actually acceptable, in order to send a message that I'm willing to pay at all for a service that's actually acceptable, and help the number-crunchers understand what it takes for a service to be actually acceptable. I won't necessarily be willing to pay US$0.99 per track forever just because I'm willing to pay it today. I hope and believe that Audiolunchbox will succeed enough to attract other services as competitors, and the competition will drive the price down to a more reasonable level.
Of course, the music cartel is notorious for its price-fixing scams, but if it appears that they're colluding to keep the prices high, then we stop dealing with them and tell them why. I don't think we should hang back now just against that future possibility - I'd rather see thinking people buy from Audiolunchbox today, make it a success, and get the industry to commit. We'll negotiate about pricing after they accept that there is no possibility for negotiation about DRM.
You know what would be worth a lot of money to me? I mean, possibly as much a dollar per album, but that is a lot of money in this context: I'd pay a dollar for correct lyrics, in machine-readable flat ASCII.
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