I assume that it works fine if you do:

flac -c -d something.flac > something.wav

lame -v - something.mp3 < something.wav

It's possible that lame might be doing a multipass encoding. Anyone know if that's the case? If so, then you'll have to disable the multipass (which could affect quality) or write to a temporary file (as above). (I don't think this is really the case now that I think about it some more.)

Hmmm. I just did it on my MacOS X machine using flac v.1.0.2 and lame v.3.89 with no problems. What OS are you using? Is it possible that stdout and stderr are getting combined somewhere? Maybe try giving a `-s' to flac?