I did a test run with my iTouch 3G in Baby Mode and my iPhone 4 in Nanny Mode and it worked great. I had to connect my iPhone headphones w/ mic to my iTouch in order to pick up audio though. The one thing that would make this app great is if it had a visual sound level feature, similar to Apples Voice Memo app. But the live audio over wi-fi is what made me choose this app over other baby monitoring apps. Most others only rely on the iPhone calling another number when noise is detected. For one, I only have one iPhone, and secondly, Id rather hear my baby in realtime.
Vincent Martinez about Baby Monitor - WiFi & Bluetooth w/Background Audio, v1.1