Currently .mp3, .aac, .m4r, etc. are all looked as "Music". So when I do an Arrange or Group By in the Lion Finder, all of these files get displayed under the heading "Music". Is there an option to make this arrange by Kind setting respect the exact file type?
It sounds like you want to "sort" your files rather than "arrange" them.
Your files can be sorted more specifically now. There are also a few other tricks to such as holding down the option key while selecting what you would like to sort by, which overrides grouping.
There is a better way that I always use when I need.
I just right click in the Finder window and hold down the 'alt' key. It provides me with the menu item to sort by when I would like :)
So, in this case, I right click in the folder, hold down the 'alt' key, choose Sort By, and choose Kind.
I hope this helps :)