Perhaps the OP should ask Pippin directly on the iPeng support thread. 
Pippin may not see this post as it on the Touch forum which seems to
have nothing to do with OP setup.

I don't use iPeng but the following is on the iPeng website - OP is
using wifi so perhaps there are other relevant settings/configurations
to check.
> 
> When you use iPeng playback outside a WiFi network, over the cellular
> network, the “lossless” formats FLAC and ALAC will not be available to
> limit the bandwidth requirements. In this case, your server will have to
> support transcoding to MP3, which generally requires more processing
> power than FLAC encoding and you will have to have the necessary
> encoding software installed.


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