I'm taking an art class in college that uses the arduino as a primary medium for kinetic sculpture. I want to do something big, and I'd like to run around a 1000 leds (maybe more), with each one being independently controllable (for fade and/or blink functions) I can do some basic tricks. I've got some time to learn, and to execute this. I know this is kind of a broad description, but Iwould love any ideas you could give.
Below are some recent similar request that you can read to get up to speed on the idea.
http://www.arduino.cc/cgi-bin/yabb2/YaBB.pl?num=1280626802
http://www.arduino.cc/cgi-bin/yabb2/YaBB.pl?num=1284075786
I've got some time to learn, and to execute this.
So start with one LED blinking and fading.
Then go to a 4 by 4 matrix. Learn how a matrix works and how to get more outputs from your arduino.
Then you will see that running 1000 LEDs is just plain stupid. It would tax an electronics student let alone an arts student.
zoomkat; thanks for the help.
I was considering something along these lines: Peggy 2 Just scaled up from 25 rows/columns to 32, and inserting it on a flexible medium rather than a hardboard.
It would tax an electronics student let alone an arts student.
Grumpy, I realize this will be a taxing problem, but I take heart in the fact that Tom Igoe's bachelors degree is in theatre arts.
It's very do-able with some shift registers and chalieplexing. 
search youtube for "Shift-Registers + Arduino P1 EASY"
What is Peggy 2?
Peggy 2 is a low-power multiplexed controller board that drives up to 625 LEDs of up to 10 mm size. Open-source and hackable. Arduino compatible.
Since this board is open source, you need to start with detailed study of the board they have developed and have a good understanding what they have done. Then look at scaling it up.