From Bukhari Volume 2, Book 15, Number 70:

Narrated Aisha:
Allah's Apostle (p.b.u.h) came to my house while two girls were singing beside me the songs of Buath (a story about the war between the two tribes of the Ansar, the Khazraj and the Aus, before Islam). The Prophet (p.b.u.h) lay down and turned his face to the other side. Then Abu Bakr came and spoke to me harshly saying, "Musical instruments of Satan near the Prophet (p.b.u.h) ? " Allah's Apostle (p.b.u.h) turned his face towards him and said, "Leave them." When Abu Bakr became inattentive, I signaled to those girls to go out and they left. It was the day of 'Id, and the Black people were playing with shields and spears; so either I requested the Prophet (p.b.u.h) or he asked me whether I would like to see the display. I replied in the affirmative. Then the Prophet (p.b.u.h) made me stand behind him and my cheek was touching his cheek and he was saying, "Carry on! O Bani Arfida," till I got tired. The Prophet (p.b.u.h) asked me, "Are you satisfied (Is that sufficient for you)?" I replied in the affirmative and he told me to leave.

This same Hadith is reported to us again in Sahih Muslim:

Book 004, Number 1942:

'A'isha reported: The Messenger of Allah (way peace be upon him) came (in my apartment) while there were two girls with me singing the song of the Battle of Bu'ath. He lay down on the bed and turned away his face. Then came Abu Bakr and he scolded me and said: Oh! this musical instrument of the devil in the house of the Messenger of Allah (may peace be upon him)! The Messenger of Allah (may peace be upon him) turned towards him and said: Leave them alone. And when he (the Holy Prophet) became inattentive, I hinted them and they went out, and it was the day of 'Id and negroes were playing with shields and spears. (I do not remember) whether I asked the Messenger of Allah (may peace be upon him) or whether he said to me if I desired to see (that sport). I said: Yes. I stood behind him with his face parallel to my face, and he said: O Banu Arfada, be busy (in your sports) till I was satiated. He said (to me): Is that enough? I said: Yes. Upon this he asked me to go.

Once again in Bukhari, this event is recorded:

Volume 5, Book 58, Number 268:

Narrated Aisha:
That once Abu Bakr came to her on the day of 'Id-ul-Fitr or 'Id ul Adha while the Prophet was with her and there were two girl singers with her, singing songs of the Ansar about the day of Buath. Abu Bakr said twice. "Musical instrument of Satan!" But the Prophet said, "Leave them Abu Bakr, for every nation has an 'Id (i.e. festival) and this day is our 'Id."

And then in Bukhari, another Hadith relates a connection between musical instruments and the family of David (saw). Further evidence that, indeed, the Psalms were musical in nature:

Volume 6, Book 61, Number 568:

Narrated Abu Musa:
That the Prophet said to him' "O Abu Musa! You have been given one of the musical wind-instruments of the family of David .'

And on one final note, I thought the following Hadith can also be used in the matter. The Hadith relates of how the adhan came to be, and how the Prophet's companions suggested the use of musical instruments such as the horn or bell like the People of the Book. Now although the Prophet ultimately approved the use of the human voice, there is no mention that the Prophet chastised his companions for suggesting musical instruments for the adhan. And if the Prophet was so very much against musical instruments, then why would his companions dare to suggest the use of such sinful things in the call to prayer????

From Muslim Book 004, Number 0735:

Ibn Umar reported: When the Muslims came to Medina, they gathered and sought to know the time of prayer but no one summoned them. One day they discussed the matter, and some of them said: Use something like the bell of the Christians and some of them said: Use horn like that of the Jews. Umar said: Why may not a be appointed who should call (people) to prayer? The Messenger of Allah (may peace be upon him) said: O Bilal, get up and summon (the people) to prayer.