That's the way it's working. I downloaded the Pandora software application from the iTunes store. I already had a Pandora account set up, so the Touch instantly accessed the account. I tune in the station I want to listen to, stick the Touch in the dock and its good to go. I had been struggling thinking I needed to go with Squeezebox or Sonos in order to get Pandora, which I love. Maybe not the best fidelity, but it's probably no worse that a stock Squeezebox or Sonos.
If anyone else has any ideas about how to do this, I would be very interested. I've thought about an Airport Express. If I understand it, it streams whatever is playing on your computer, so I guess one could use the Touch to access the main computer and direct the stream to an AE. Any other ideas?
Thanks