They lied, it seems that with the 10.5 update I’ve tried with, it does not request metadata for your URL and that means the metadata is never supplied. If I change the URL request to be http://….:8000/ then the header requesting metadata appears. I also tried here locally and it seems that the .mp3 extension is the deciding factor.
So It looks like itunes is not sending the icy-metadata:1 header when the mountpoint has an extension which with shoutcast it never is.
this means that it plays but no inserts are provided. You can verify this by changing your xml configuration for icecast and add an alias of
<alias source="/stream_rco" dest="/stream_rco.mp3" />
Then try requesting http://…..:8000/stream_rco in itunes. I suspect that will then work. If the apple person is not aware what all this is about then tell them to get in touch with me.