This posting is older than 6 months and can contain outdated information.
From the FAQ:
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Q: How can I listen to / watch content from iTunes® on my iPhone™ /
iPod® Touch? ("Streaming")(FAQ015E0229)
A: First of all, setup the AJAX Remote as described in the FAQ entry
"How do I setup the AJAX Remote?".
Then follow these steps:
• In AJAX Remote on your iPod® Touch or iPhone™, tap on the "Music"
symbol.
• Now tap on "Library" (upper-right corner) and navigate to the media
file you want to playback on your iPod® Touch or iPhone™.
• Tap on the blue play button.
• If QuickTime® thinks that it can playback the file, you can now
start playback by tapping on dark-blue playback button.
All preference settings are already set correctly by default. If
however, you don't see any playback symbols: the remote access to
files is only supported if you have you have set a password ("Require
password" is enabled) and the option "Allow access to the files in
your iTunes® library ("streaming")" is enabled as well.
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Given your description, the last paragraph is the solution to your
problem: enabling password protection and then giving permission to
remote access (the latter is automatically turned off, if you turn off
password protection).
Best regards,
Felix Schwarz