Works really fine. Has a built-in equalizer, you can create playlists. But be aware that you have to move your music files into the VLC folder on iOS and that your music files won't be backed up by iTunes! Cheers
Discussion
Btw the reason why iTunes won't backup the music files in the VLC folder is because since iOS 4 or so Apple doesn't allow you to backup the apps themselves. And without installing the VLC app there won't be any VLC folder, thus no files. If you want your music files to be backuped move them to a manually created folder first and then do your local iTunes backup.