When you api:execute('conference'...) the function blocks. Then you have to stream from outside, possibly using an inbound socket application.Maybe alternatively you can call http://wiki.freeswitch.org/wiki/Mod_commands#sched_api just before put someone on the conference.
api = freeswitch.API()
confplay = api:execute("bgapi", "conference " .. argv[1] .. " play /usr/local/freeswitch/sounds/tones/norstar.wav ")