I think it's possible to do something like this with one arduino + lots of daisy chained shift registers controlling lots of relays to power the lights (LEDs). Manually syncronizing the lights with a song shouldn't be too difficult.
What do you think? Am I missing something? Note that I don't plan to do it (because I have no house yet!), I just would like to know because I'm curious :).
Each light isn't controlled individually, they're done in big blocks. There could be less 'outputs' in that than in an LED cube.
Edit: Yep. On the Youtube page it says there's 88 channels. Six 16-bit shift registers chained together, three Arduino pins to control them...a bunch of MOSFETs to switch the power. That's it.