Justin, I don't want to be too forward, but I sent you a forum message about some inexpensive local possibilities for ensembles you guys might consider. Perhaps there's a way you wouldn't have to outsource for affordable musicians. As a classical guitarist and lutenist local to orange county I may be a little biased, but I'm going to say hell yes there should be live music. Small ensembles and soloists when appropriate.
Just an idea, but I think it would be cool if the larger cities had street musicians sprinkled here and there, near markets or around taverns, playing guitar, vihuela, lute, recorder, crumhorn, or viola da gamba sorts of things. I always loved those little instances of diegetic music/sound you would encounter while running around in the IE games, like the monks chanting prophecies at the beginning of Baldur's Gate. It made the world feel alive.