I was playing around and did something similar with video encoding. The server code starts a running ffmpeg process, and then the handler code just looks like this:

    server = http.createServer(function(request, response) {
        request.pipe(ffmpeg.process.stdin);
        ffmpeg.process.stdout.pipe(response);
    });

What a nice interface! The end result is that you can do weird stuff like:

    $ curl -T my_video.mp4 http://localhost:9599 | mplayer