I am back on-line after a weekend spent with friends in a small, small town in western Virginia, where Irish music was played 12 hours (at least) every day, and there was much hilarity and consumption of beverages. But I missed not having a computer...sad.
Irish music has shown up recently in two fantasy books--The New Policeman, by Kate Thompson, and Lament, by Maggie Stiefvater. In both books the music adds a depth to the story; a sort of thick description (ala Geertz, an anthropologist who coined the term to describe the sort of ethnography he advocated) that makes a fantastic story real (or another culture come to life in the reader's mind. Ethnography and fantasy have lots in common).
Two older books by R.A. MacAvoy (a name that is doubtless familiar to others who read lots of fantasy in the 1980s--the Damiano books were the best known) feature an Irish fiddle player--Tea With the Black Dragon(1983) and Twisting the Rope (1986). I haven't read them for ages, but I remember them as enjoyable (but obviously not eminently re-readable) mystery/music/dragon magic combinations.
Northumbrian small pipes have shown up in fantasy as well, in The Little Country (1991), by Charles de Lint, and it is the piping, I think, that makes this one memorable, although the cover shows a fiddle. Irish pipes, I know from living with my husband's set, look like strange squids when lying in grassy fields like this fiddle is, and perhaps Northumbrian pipes do too, and this wasn't the effect they wanted. Or perhaps there was important fiddle playing too, that I just don't remember...
As far as I know, that's it for "Celtic" music in fantasy. I'd be curious to see any examples anyone else knows...or any examples of YA or middle grade regular fiction.