Although I'm not Steve, I think I can answer your questions.
@JohnM
The audio session category of your app determines if you can use the hardware path or not. Every category that allows other audio (like the ipod) to mix with yours, can't use the hardware path.
In general, the less audio data you need to transmit, the better performance will be. I wouldn't make the bitrate too low, but lower the samplerate and channels so the uncompressed audio is smaller in size.
For sound effects, I would recommend IMA4, see the link mentioned at the bottom of this post for more information. Again make them as small as possible for optimal performance. I used 8-bit 16000 Hz, mono sound effects for my last game.
@wmwilson
Apple still recommends IMA4 for playing multiple sounds at once (link).