DVDdoug, thanks for such a detailed reply, I could just about keep up with what you said!
Would a voltage divider resistor circuit affect the original circuit badly? I mean, would original LEDs still work or would there be too much additional current draw on circuit?
I'm probably being stupid but you mentioned pins 1, 7 and 8 from U1 - did you mean IC1, it has the same pins? The schematic shows IC1 output as 2.8v, not 16v, so no voltage reduction necessary then surely?
In terms of reading the PWM signal, for simplicity is it feasible to eliminate the RC filter entirely? As I understand it, the RC filter would just pass through the peaks of the signal and coupled to a capacitor allow for easier voltage monitoring. Are these components essential? Couldn't the Arduino average out several readings from one pulse width and get a good value?
...This would also be much easier to wire up too, which is nice!