Recently I discovered gnump3d. It supports downsampling, which is a feature I especially need. However, the example reencoding command for handling MP3s doesn't seem to work. Instead, I am using a different variant.
downsample_medium_mp3 = \ /usr/bin/sox -t mp3 $FILENAME -t wav - | /usr/bin/toolame -b 128 - -
The original uses the lame encoder to both read the MP3 source file and then reencode it, but that seems to fail miserably. Fortunately, using sox seems to resolve it.
It's useful to note that this will not throttle the client connection, so if your goal was to limit the stream to, say, 128Kbps, it won't work. Instead, you need to rate limit some other way.