I suppose I'm just looking for an excuse to be a bard but I think musical instruments might be an interesting addition to the game. I can think of a few different potential effects for music although the main drawback I can see now is hearing the same damn sound file you play the lute.
Potential Instruments and tied in focuses.
Flute: -Increase taming done by nearby player's Quell the Beast
-Cause animals to deaggro
-Negate Rage
-Anything focusing on interaction between bard & wilderness.
Drum: -Increase SHP/Stamina regeneration of partied players
-Give a %boost on combat related attributes or skills
-Focus this instrument on combat moral/recovery
Lute: -Increase happiness of players around the bard (Hopefully happiness will do something by then)
-Increase speed at which nearby players perform tasks (chopping wood, harvest craps etc...)
-Focus on improving life inside the town.
As for hearing the same song over and over, I guess the best that can be done is to make sure the song clips are as short as possible while still getting the point across, there being a cool down time before the bard can play the tune again (which may be equal to the length of the effect or longer than).
I don't expect this to be implemented... ever, but it was just an idea that popped into my mind and I just wanted to drop it out here. Feel free to add your thoughts on it or state why it's a bad idea anyways.