It's certainly something that is on my list to look at, although I'm not a java expert so there will be a big learning curve in getting the audio in to the device.
I think the main problem is the diversity of hardware, while most phones will have an external mic input, tablets may not. They will probably have a built in mic, but not a way of getting the audio directly in. And it's tablets where most audio apps would become usable, not least due to the speed of the newer devices and the screen sizes.
The USB host supported in Android 3+ will help, but will require additional hardware.
There are sequencers and audio processing software written in Java, so I am hopeful that speed won't be too much of an issue with the right hardware.
For large companies I think it will boil down to the uncertain size of the potential market.