I caught the S subway this evening and at the 42nd street end is a 6 piece Jazz band with an absolutely hammering trombone player.
There was about 20-30 people just standing around and listening. I captured it on video but my cell phone just doesn't record loud music well.
I bought a cd from them for $10 and have uploaded 4 of the tracks into the "music of the day" box on the bottom right.
Apparently they are called the Alex Lodico Ensemble - dont know if they play gigs around town but they sure know how to fill a train station.
Update - 31st March 2008
P.S. someone just emailed me this YouTube link to a clip at Penn Station http://www.youtube.com/watch?v=NO-jnn9a8YI