I found this on the Pandora FAQ back in November, but when I checked yesterday, there was nothing on there regarding the sound quality...
Why am I experiencing audio issues on Froyo? If you have upgraded to Froyo (Android 2.2), you may notice audio-quality issues while listening to Pandora. The Android team is aware of this issue with AAC+ audio and has released a fix, which is gradually being rolled out on the various Android handsets.
Currently the Sprint HTC EVO and the Google Nexus One have OTA Android OS updates that incorporate this AAC+ audio fix.
If you have a different handset than the two mentioned, please contact the support team for your handset if you have any further questions about this issue.