Let me summarize my understanding:
to play stored music on your hard disk, squeezeboxes require a squeezecenter server on a desktop, or a laptop or a fairly capable NAS box. I personally hate this as it needs another computer running to play the music. HDD can not be attached directly to squeezebox. Hope this would change with new squeezebox touch.
So to play stored music, the commands from remote actually go to the squeezecenter server. Server changes the song and the squeezebox simple plays what it gets streamed from the server.
Server (squeezecenter) also has a web server built in, and has web pages customized for handhelds. So if you can point your handheld's browser to this internal url, you can see the entire library, browse and search. Cover art may also be displayed.
ipeng is a "custom browser application" for ipods that can talk to squeezecenter server and usability may be better.
anm and mahiruha,
could you'll post a detailed note on how one goes about making the ipod touch (anm) and the nokia (mahiruha) work as the handheld remote? this means one can see songs and cover art on your phone/ipod touch, switch, forward etc?