You will need a 300mw laser at least - anything less than that and you are fighting with the noise floor.
There are two functions you need to create in the Arduino for a frameless harp - control of the galvanometer mirror to "split" the beams, and reading the returned pulses.
I used a hardware interrupt line (2) to read the pulses, and connected some light sensors to differential amplifiers to get a "clean" return signal. This is very much like the signal used in TV remote controls.
In fact the Jameco newsletter this month has an article by Forrest Mims on converting the signal from a TV remote to an audio signal - this circuit is very much like the one I use.
Sorry I can't give out the info any more, but the terms of the deal preclude me from doing that.
Steve