For the kind of games we develop, music needs to be somewhat integral from start to finish, but it doesn't become really vital to discuss and implement until mid-production all the way through to post production. If you're smart, you'll involve the audio guys in the development process from day one. Sure, their real, grinding work doesn't start until you're well into production. But it's critical that the sound guy knows the vibe the team is going for and has time to get the creative juices flowing and can work on sketch tunes keyed to specific events, missions or what have you. Earlier the better, in my book.
Music is auditioned and then approved.
Even after approval, it isn't finalized. Music indeed gets changed as the game itself changes right up until gold. Well, guess I can't argue with that. You can pre-plan until your brain fries and your fingers bleed but making a game is still as much about adapting as you go as it is about anything else. Games change, to some extent, up to the day you sign off.