This is mostly to remind myself, so I don’t have to mess with the settings again next time:

1. Download the Playlist (.pls file), open in text editor, extract the station url (something like http://ice.somafm.com/suburbsofgoa)
2. Open VLC, go to File/Open Network, enter the url extracted from the playlist
3. Click on Settings…, choose any filenmane.mp3.
4. Use the following settings: do NOT check “dump raw input” if you want to listen while recording , check “display the stream locally” to have it play while recording, use “Encapsulation method: Raw”, under “Transcoding options”, check audio,  pick mp3 from the dropdown list, pick a reasonable bitrate (eg. 128).
5. Hit OK and listen and record as long as you like

Of course, this will just treat it as a continuous stream, completely ignoring tracks or titles. But it works just fine to record in chunks of about 30 minutes, import those into an iTunes playlist, and use that as “offline radio” on the ipod.