note: This is still a draft which I plan to expand into more precise instructions

I'd like to elaborate a bit more on my previous comment, which while also dealing with visualization, is about a software solution instead of the hardware solution I also posted.

The basic idea is displaying a spectrogram together with the (windowed) Minecraft so that the audio visualization helps locating mobs, caves etc. So first some background information from Wikipedia:

A spectrogram is a time-varying spectral representation (forming an image) that shows how the spectral density of a signal varies with time. Also known as spectral waterfalls, sonograms, voiceprints, or voicegrams, spectrograms are used to identify phonetic sounds, to analyse the cries of animals; they were also used in many other fields including music, sonar/radar, speech processing, seismology, etc. The instrument that generates a spectrogram is called a spectrograph.

As an example, here's a spectrogram of a violin:

Time flows from left to right while the bottom represents lower frequencies and the top the higher ones. It's actually easier to understand in animation, so here's some classical music

(there's also the infamous Aphex Twin face, see e.g. here. It's actually incredible what stuff one can do with this.)

Since the location of objects requires Stereo sound, you need a software that can plot a real time stereo spectrogram. (Ok, maybe a simple spectral analyser may suffice, but in order to compensate for the difficulty of identifying a signal, looking back in time for a second sounds fair) I'll assume you don't want to buy a commercial product for this, and why should you when there's freeware available?

The simplest one I found is called Spectrogram 5.0. It's a tiny download and provides a stereo view, although the resolution is quite raw IMHO. (I'll update this answer if you have trouble with the configuration).

The OpenSource project Spek looks promising but doesn't seem to support live output at the moment, while the Overtone Analyzer Free Edition looks a lot more elaborated but I haven't found a Stereo visualization setting yet. Other programs I have not yet checked are SFS/RTGRAM, WaveSurfer, Waterfall Spectrum Analyzer.

Finally, there is Spectrum Lab, which I have used quite some time ago. I don't remember if it supports Stereo, but with the correct settings the results are great...