I was able to get the program to run on the raspberry pi after finding a very helpful google groups thread on this error:

Kernel driver is active, or device is claimed by second instance of librtlsdr.
In the first case, please either detach or blacklist the kernel module
(dvb_usb_rtl28xxu), or enable automatic detaching at compile time.

SUPER HELPFUL!
Dongle connection error solved: claimed by second instance of librtlsdr

I typed:

sudo rmmod dvb_usb_rtl28xxu

and it unmounted the dvb portion of the dongle, or whatever was preventing it from connecting in the first place.

Im also using a slightly different dongle:
KEEDOX® RTL-SDR, FM+DAB, DVB-T USB Stick Set with RTL2832U & R820T.

Additionally I installed all of the neccessary libraries/dependancies for aplay to work (which is absolutely a must because it is used to process the radio real time and output audio).

full install guide here.

The ALSA utilities:
sudo apt-get install alsa-utils

MP3 tools:
sudo apt-get install mpg321

WAV to MP3 conversion tool:
sudo apt-get install lame

Also set the audio to analog output because I was using headphones:
sudo amixer cset numid=3 1

I tuned to the station suggested by http://sdr.osmocom.org/trac/wiki/rtl-sdr
rtl_fm -f 96.3e6 -M wbfm -s 200000 -r 48000 – | aplay -r 48k -f S16_LE

CPU is running below 30% while listening.