The connection between the hosts file and this type of behaviour is the routing. For example, if the songtouch is a request sent from the site handling the streaming radio to another site that is redirected to you're localhost, than the request will never get outside of you're localhost (priority will be given to the hosts file over DNS).
If you're hosts file is being used to rebound advertising, this could be the case with this.
Generally, the hosts file has only one entry in it by default in windows:
But if you add more, 127.0.0.1 codingforums.com, any request to coding forums would result in you're apache host trying to serve out the site.
As for capturing activity, pretty much any firewall will have a logging feature in it that will let you see requests and responses.
Lol, almost missed the point >.<
What is the second line in you're hosts file?