Hi Graham
This is true, you can't listen to music and meditate in the sense that you meditate to let go of thoughts. Listening to music (or any sounds) will create thoughts and prevent that process. However, it's possible to meditate with the music as a focus, but this won't be the same sort of deep meditation that you would typically experience from mantra based meditations.
If the Lifeflow did not have the music/sound effects and just had the entrainment frequencies then they would work just as well, however I guess some people would feel a little cheated as if they'd bought a track of almost nothing.
When I meditate with lifeflow, I quickly get into the meditative state where I'm not focused on the sounds, so it's no issue for me. The Lifeflow is just something there that's doing it's job, I have no focus on it, I'm simply just aware that it's there.
Hugs
Giles