Here is a little screencast of a simple setup with 3 boxes reacting to sound in blender game engine. It has been done with processing 1.0.7 and blender 2.49b.

This video shows where to put scripts and how to use them with the game logic. It was not clear for me, hope it will help someone.

And here is a zip, containing the sources and scripts:
idflood.com/files/blenderaudio.zip

This setup has a big known bug. It doesn't work if you export the scene as a blender game engine runtime.