greta idea. it is beign done to a certain exptent already (maybe not as local as you would have it)
Nessmp3.com is for independant and unsigned bands. pending a submission vote bands accepted are given an artist page which they are free to modify, host mp3s, videos, pictures, show event dates and even a shop facility to globaly sell merch yourself!
the best part however is the new software allows you to make up stations of hosted artists for yourself and visitors to listen to. ALSO nessmp3radio was doing well and climbing in the Live365 charts giving nessmp3 artist global exposure (listeners from as far as new zeland were logging onto the site and listening to the radio station!)
One of nessmp3's co founders is Dave Siddley, the guy behind the Bond Electroglyde guitar! whislt one of the broadcasters is Stevie Smith, ex mouthy player with Bad Manners!
what you have in mind is far more local though so i can see it taking off! if you want any help on how they set up the radio station and stuff PM me and i'll pass on a few email addresses adn phone numbers.