Perhaps that mega is an overkill. I may look at returning or it keep it to learn more about them and what they can do anyways. I would like it all small and compact so I think I may go for a nano now instead as I found a project someone did here to be useful and will use this direction for mine: http://www.cjo20.net/blog/?p=42
but just use the nano instead.
I've gone for the following LED Strip: http://www.yozop.com/index.php/5m-ws2801-led-digital-tape-32pcs-ic-5050-smd-rgb-led-each-meter.html
Thanks again for your reply and suggestions and will let you know how it all goes.