Definitely a shield has to be used. Any suggestions for a good shield that will fit my requirements?
And this board could be the right one: http://www.openmusiclabs.com/2011/08/arduino-audio-codec-shield/
At only $44,
I'll check it out the board.
I am looking for a standalone solution rather than the ability to connect to an external MIDI module or computer so that the instrument would be self contained with all sounds stored on board.
For example, I found the Rugged Audio Shield (http://ruggedcircuits.com/html/rugged_audio_shield.html),