If you're using OSS (which you probably are if you're on a 2.4 kernel), then only one application (it may actually be only one thread...) can access the sound device (/dev/dsp) at one time, and locks out everything else. This is a limitation of the old OSS system.
Try installing ALSA.
The reason that TS doesn't work when you replace that file is because the file is probably a shared object file, so your standalone program isn't really standalone at all. Most (large) programs in Linux use shared objects, even the kernel itself if you're running a modular kernel, so moving and replacing these files can break apps. (Shared objects are effectively the same as DLLs in Windows.) Just because the file isn't in /lib or /usr/lib or whatever (I've never actually seen a directory called 'system' in a Linux filesystem) doesn't make it any less essential to the operation of the program.