I, too, would like to study music through the OU - sadly, I'm already registered as a full-time student at another institution so I'm not allowed quite yet

As for performance modules - for the MA (Mus) they optionally allow an FRSM to be substituted for one of the three modules. I think they chose to do this as it allows them, essentially, to out-source the necessary infrastructure to support a performance module by allowing the AB to handle it for them. With the claim that an FRSM is the same level as master's level performance modules, it's also good to see that it can be used as such.
Edit: looking at the credit transfer site, it appears that a DipABRSM counts for '35 points at level 1 with a "BA" designation' and an LRSM counts for '65 points at level 2 with a "BA" designation'.
Looking at what one needs for one's FRSM written submission and viva knowledge, it seems like the master's modules would be excellent preparation; as such, my plan - ultimately - is to do two of the three modules before an FRSM. (I know, forward planning given I've only just done my Dip....

) Another plus of the FRSM, too, is that it's cheaper than a master's module (£500 instead of £1080 if memory serves - still not cheap, but every little helps).
I have a lot of respect for the OU in general and personally think that it should receive a great deal more government subsidy - not only does it encourage life-long learning (a good thing in my opinion), but by allowing people to study whilst working the burden on the taxpayer is reduced substantially. I wouldn't be suprised if many OU students would still be making a net contribution to the government's coffers even if their course fees were covered by the state

Jane, if I may ask just out of curiosity: what subject are you an OU tutor in?