MrLinx,
Grumpy Mike was not entirely correct. You can indeed multiplex with the standard row/column method, you just have to supply more current during that fraction of a second that the LED is on. LEDs can handle maybe 4-5x their rated current if you stay under a 10% duty cycle. The latest versions of the Peggy 2.0 (go get the schematic) have trim pots on the current control reference resistor inputs on the LED drivers. That was something we added as well, before it was in the Peggy schematic. You have to be sure to turn those down (well, up in resistance) when programming the board, as you can blow out LEDs since you are sharing the serial TX/RX pins with the first multiplexer. We used 1k trim pots, but I wish I had user 0.5k pots to give me more adjustment range. I forget what the newest Peggy uses, but I think it limits the maximum brightness so you can't easily fry the LEDs.
I don't think you want to know how much I spent. :o We basically built an electronics lab in my basement, and outfitting that was quite costly. Honestly a lot of that was shipping costs, and ordering 10 of items we only needed 3 of, but sometimes having extras on hand is good and unit costs frequently drop significantly when you order more. We also were under a serious time crunch, so instead of doing something fun and DIY like making our own oscilloscope or logic analyzer when we needed them, we frequently just had to buy whatever we could get the fastest. But if you left out the music part of our project, you could do without a lot of the fancy tools and such. Or just use our design.
But we were able to get 1,000 LEDs for under $0.10 each, which was quite a good deal. I bought them from www.c-leds.com. If I had to estimate the cost of the electronic components we used, including LEDs, and not including the parts we have extras of, I would put it at somewhere between $350-$500. That includes the 500 or so feet of tinned copper bus wire, all the DB-15 connectors, the MIDI controller, etc. The physical wooden board we built probably cost us close to $350 in materials (including ping pong balls), and more in incidentals.
What size do you want your display to be? Do you want to use diffusers on the LEDs? These are things to consider.
You could buy the Peggy 2.0 kit and then run your own wires from the edges of the rows and columns to a larger board with the LEDs on it. I believe someone on the EMSL's Peggy forum did just that. We opted to build our own circuit to give us more control over its interoperability and flexibility. Also, we moved the multiplexers and LED drivers to the physical board, using VGA cables to communicate between the AtMega328P and them. This necessitated pull-down resistors as we were getting a lot of noise and visual weirdness. We also learned that VGA cables are HIGHLY variable. Some have each pin except for 2 grounds as separate wires. The ones we had only had about 9 usable pins, as all the other were connected together.
You could use your Arduino with an AtMega328P on it. Just get a breadboard and put the multiplexers and LED drivers on it, then connect them as per the schematic. You should look at a schematic or layout diagram of your Arduino variant though, as the Arduino pin number mapping isn't part of the Peggy 2.0 schematic.
Hope that helped.
We also have code we'd be happy to share if you did decide to go to 30x30 or integrate Pong, music, or Etch-a-Sketch. I think my girlfriend just wants to get it cleaned up a bit first. There's a lot in there that we ended up not using, like a battery voltage sensor, motion sensor, and a light sensor.
If you get this working, my girlfriend and I really want to get ours connected to the web and be able to play pong at parties with people across the country on another board. So here's hoping you do it! 
One more thing. I really really really wish we had put RGB LEDs in, even if it cost 50% more. If we had, we could have a working one-color display first, and then when we felt like it, wire up the other colors' leads as well to another microcontroller and do full color. So think about that before you buy LEDs and start permanently attaching them to things.
Cheers
