First learn how to cascade 4 shift registers.
You will need a long int to hold all 32 bits.
Your code then needs to simply set or clear the single bit corresponding to the LED you want to light / turn off in that long int.
Use the bit set, bit clear functions for this.
Then you shift the whole lot out to the shift registers.
a) how the midi signal going into the midi 2 serial converter looks coming out the other end.
As this is software it simply directs the bytes you send it into the MIDI channels, and send you the bytes from the MIDI channels to the serial port which you read like any other serial input stream.
Each MIDI signal will be something like (144, 60, 124)
Yes and those are the bytes you will receive over the serial port.
how the shift register sketch responds to the MIDI signal
Well until you change it there will be no effect because you are not looking at any serial input.
This project might help you parse the incoming MIDI signals.http://www.thebox.myzen.co.uk/Hardware/Glockenspiel.html