You have 40 digital I/Os so I think a Mega would be enough to handle that.
The inputs can be read with voltage dividers. Not my go-to solution, but it's cheap and fairly easy.
For the indicators, since the relay noise is a problem, you could use relay boards and remove the relays, or at least cut the signal line to the coil with an X-acto knife to keep them from switching.
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I was going to say that you could then use the relay drivers to switch the lights directly, but a lot of those boards only use 5V optos, not actual relay drivers so that might not work.