All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His slave and Messenger. We ask Allaah to exalt his mention as well as that of his family and all his companions.
We have already issued Fataawa 81239, 81545 and 84664 on the ruling of singing and music, so please refer to them.
As for the narration which the questioner mentioned, it is an authentic narration reported by Al-Bukhari and Muslim . Nonetheless, this narration does not prove the permissibility of singing and using musical instruments. As a matter of fact the Prophet endorsed the description of Abu Bakr for singing as "the musical instruments of the devil", he further clarified to him that that day was a day of 'Eed in which certain singing is allowed as an exception. He told him: ''O Abu Bakr, leave them, every people have their day of 'Eed…''. He did not tell him that songs are permissible and that they are not considered as musical instruments of the devil.
Al-'Atheem Abaadi said: ‘The Prophet did not disapprove Abu Bakr for calling the songs 'the musical instruments of the devil'. He approved of the singing of the two girls as they were young and not yet pubescent. In addition, the girls were singing Bedouin songs of the battle of Bu'aath about courage and war.
However, under the influence of the devil, some people have stretched this exception to include the singing of women or feminine looking boys whose voices and appearances cause temptation and who sing using lyrics that invites to fornication, adultery, dissoluteness, and promote the consumption of intoxicants. Furthermore, they sing using musical instruments which Allaah and His Prophet had prohibited. They neglect clear evidences that prohibit such acts and base the permissibility of this prohibited act on the narration of the two young girls who did not use a flute, or Duff (a tambourine-like instrument without bells) and they never danced or clapped when singing. Finally, this practice of leaving the conclusive evidences for an unclear indication of an evidence is the characteristic of the people of falsehood.'
Allaah Knows best.