This is an authentic hadîth. It is narrated in Sahîh al-Bukhârî as a hanging narration (mu`allaq). Ibn Hajar al-`Asqalânî has researched this narration and demonstrated it to have nine fully connected lines of transmission.
With respect to the ruling on music, all Islamic scholars agree that music which is associated with drinking, vice, impropriety, and un-Islamic conduct is unlawful. Scholars differ regarding music that is free from all such negative associations.
The majority of Muslim scholars prohibit music and musical instruments in their own right, even in the absence of any negative connotations. There are number of hadîth that are negative towards music, including the hadîth narrated by Abû Mâlik al-Ash`arî in Sahîh al-Bukhâri: “I heard the Prophet (peace be upon him) say: “There will be a group of my people who will make permissible for themselves adultery, pure silk, intoxicants and musical instruments.”
Most scholars interpret this inarguably authentic hadîth to mean that music is unlawful. This is an obvious implication from reading the hadîth. The idea of “making permissible” suggests an initial impermissibility. Also there is the fact that instrumental music is mentioned in conjunction with other things being “made permissible” that are inarguably unlawful, and this gives an indication that musical instruments share the same ruling.
The scholars who prohibit music – and they are the great majority of scholars of all four schools of law – take these hadîth as the basis for a general ruling prohibiting music.
As for other hadîth that refer to women playing the daff on various occasions, these hadîth are seen as providing an exception to the general rule. The exceptions found in the Sunnah always refer to nothing other than the voice and the daff (a tambourine without bells).
The scholars who prohibit music acknowledge this exception. However, they disagree as to how far the exception should be taken. Some scholars regard the exception as general, and they allow the daff for men and women under all occasions. Some restrict the exceptions to women. Some restrict it to festive occasions. Some restrict the exception to women on festive occasions.
With respect to the instrument itself, some scholars restrict the concession to the daff, while others extend it to allow a tambourine with bells or other types of drum.
There are a few scholars who have permitted music that is free from negative associations. These scholars include Ibn Hazm and to some extent Abû Hâmid al-Ghazâlî.
Most of the scholars who permit music (that is free from negative associations) interpret the same set of texts differently. They argue that the prohibition of music is contextual. Basically, they do not see in the various hadîth a general prohibition against music, but only a prohibition of music when is associated with other questionable activities. As a consequence, they take it as a general ruling that music is lawful in and of itself.
Those who wish to assert the lawfulness of music often go further and take the hadîth about singing and the daff on special occasions as supporting this basic permissibility of music and musical instruments in general. They see the various hadîth that disfavor music as providing an exception to this basic permissibility, prohibiting music only in circumstances where music is used in a sinful context.
Each of us, on an individual basis, needs to compare these two contrasting arguments, objectively, and determine which of these two interpretations of the evidence seems more likely to be the safer and most correct one, and which of these interpretations is closer to wishful thinking.
And Allah knows best.