Telephone Idea - Feasibility / Advice

Retroplayer:
are you expecting this to be real-time?

Sorry about that, yes I would like this to be real-time. I've read that this is where it can get quite complicated.

Real-time continuous output, adjustable with the rotary wheel.

Retroplayer:
Another option would be to get a PCM encoder and decoder IC set. Put your arduino in between. You would then take a sample of a second or two of audio and spit it out to the decoder faster or slower depending on the effect you want.

Thanks, that sounds about right I'll look into it.