In case you don't feel that ZPUino is as easy to work with as Arduino is, here's a small example I just uploaded, which interacts with an LCD, a rotary encoder, and some LEDs:
http://www.alvie.com/zpuino/examples.html
Stay tuned for a music player (44100Hz, 2-channel, Stereo, from SD card [wav], 99% in pure software) which I'll be releasing soon. And guess - no external devices needed, the two 16-bit internal SigmaDelta DAC modulators just do the job (and way better than PWM).
Alvie