My Christmas tone library project used 1 speaker pin and two pwm pins for LED fading with no problem.
Thanks Big Oil, I tried that, but still no success. Is it because I'm running two speakers with two separate tones that's causing the problem then?
I'm actually using this Tone library, not the one included with the Arduino: http://code.google.com/p/rogue-code/wiki/ToneLibraryDocumentation#Projects/Examples_Using_Tone_Library_and_Core_tone()
I have a feeling multiple tones are using the CTC timers on the Duemilanove, though I thought there were three... 2, 1, and 0. And, to my knowledge, 0 is the one responsible for PWM output, so I didn't expect there to be any conflict.
I wish I could just go with one tone, but unfortunately I require two, but that would probably allow me to regain the fading of the LEDs.
Thanks for the help though