Badspot limits the size of music files in Blockland to avoid issues with copyrighted music appearing in his game or being shared on his website. I wouldn't be surprised if he also limits the type of music files which can be used. Whether that's intentional or through his own inaction.
you can get stereo music to work if you make it play it using a 2d object, not a 3d object (bad at explaining this help)
Blockland will support nothing but mono ogg for the considerable future. An engine-wide rewrite would be required to imprpve this.
its an engine limitation, not a design choice