Well the nice thing is that building a proxy for all http traffic would be a huge pain in the ass. Fiddler makes this easy as its plug in architecture allows you define a function that is called whenever an http response finishes. So now you have the url and all the response data and you can do whatever you want with this and you don't have to worry about the details. Fiddler exposes methods like SaveResponse(filename) and uirContains(string), etc. If you look at the code, it simply says, is this a pandora xml file? if yes, remember the audio urls and data. Is this an audio url that we saw earlier? If yes, save it and tag it. So it will work with any pandora client running over http including firefox, ie and the pandora widget and task tray app.
Incidentally I went to deezer.com with fiddler running and it's basically the same thing. They don't use xml, but before the music plays, there's a file transmitted with all the artist/album/song details and a songID.. then later your browser issues a request for that songID. The song itself is an FLV format file, but it would be easy to add another exe that converts FLV to wav and then does the lame.exe step and tagging as well.
If someone went all out, you could build this plugin to work against any radio site out there.