I've put that project aside for the moment but my next approach will be to use an ATTiny85 (which is used on the BlinkM Smart LED) with the GyzRgb firmware to drive my LED's. This separates the PWM and color ramping from my main Arduino to a second processor similar in the way I'm offloading servo PWM to the TLC5940.
Here's some info on the scheme:
http://code.google.com/p/codalyze/wiki/CyzRgb
http://todbot.com/blog/2011/03/22/blinkm-smart-led-as-the-smallest-arduino/
http://code.google.com/p/blinkm-projects/wiki/ReflashBlinkM
Michael