What is the audio looping bug exactly? It works fine for me, playing the songs until they are complete, then looping them. Maybe try updating your flash player, and if that doesn't work, I'll look into it, but it's tough to solve bugs when I can't reproduce them on my machine.
The "lumps" problem is known, it has to do with Box2D (the physics engine used), and is non-trivial to fix. Usually, you can just jump to escape them, and the snags, while annoying, are rare and don't cause major problems. Can you share the level where you got stuck on the lump? Perhaps I can fix it so you can jump to escape it so it's not a level-ending bug.
As for the square pillars of water, I suppose it is kind of silly, but it serves its purpose haha. The levels can be designed so that the water looks like it's contained by land, but the water doesn't flow, it's just a static shape. Maybe having the water flow over the landscape could be pretty cool, especially if it could be manipulated, but that's an idea for another game. I'll definitely keep that in mind if I make a sequel!
Thanks for all the good feedback, and I'm glad you enjoyed the game!