I got into 'it' and out of 'it' with a fellow cyclist by saying "On your left!" politely and friendly-like. He started giving me ****, telling me to get a bell (to which I answered "I have one, I just thought I'd be more friendly") turns out he either backed down, or we miscommunicated and he was joking and I missed it.. either way, we ended up chatting and parting ways in a good way (which made me feel much better - I'd much rather resolve these things than leave someone frustrated/uppity).

Seems in this case you did everything you could've, so good for you, and good for you for trying to resolve the issue (some people just won't get it) - try the airzound next time, and perhaps mention that headphones are a little dangerous when turned up too loud. I get wary of cycling behind someone with headphones in, though most times when I pass and say "hi" I get a response, so they're obviously using sense in their volume levels.