More arduino IO

I play with a lot of projects that use lots of different kinds of sensors and often whenever I seek advice on increasing the number of IO pins I'm often questioned about why/what kinds of sensors I'm using. I do understand that you need the right tool for the right job. The problem is, after I build one project (I tear down and rebuild quick), say, where I was able to utilize daisy-chained analog mux/demux chips to increase IO for one set of sensors or shift registers for another application that called for it, I get a big headache. For the number of different fun projects I like to experiment with it really would be fantastically easier if I could just have more IO pins like the ones straight off of the arduino that don't run into the cons of using a shift register or miltiplexer chip. I have thought about saving up for an arduino mega just for the added IO channels or finding a huge DIP microcontroller chip that has a ton of IO pins, but I remembered a tutorial I read a little while ago about joining two arduinos together as a master and slave to increase the IO capability. On Sparkfun the ATmega328 runs at about $5.50 a piece, and I was wondering if it is possible or worthwhile to work on daisy-chaining the chips on a board and lining up the all of the IO's by analog, digital, and PWM and so forth so I would have a 100+ sensor prototyper to work with.

What are the downsides to doing that? and does anyone thing that from an educational & discovery & fun perspective that it would be better to just find a different non-DIP microcontroller that has a large number of IO channels?

If anybody was wondering a few of the projects I have worked on are not too practical except for my pursuit of happiness which I believe is practical. One fun projects I worked on was an array of photoconductors across the room so I could map out lighting. Another involved lots of temperature sensors used in much the same way, and while it may not be practical to simultaneously take readings from every sensor that is what I want to do.

Please be concrete and specify the number of sensors, what kind of IO they have , the frequency of sampling and the sample size...

Only then we can make an educated estimate ..

multiplexers can help - -

How about a i2c gpio? Same thing except all the slave coding is done already just communicate with them

On Sparkfun the ATmega328 runs at about $5.50 a piece

And then you need the crystal and the decoupling caps and in the end you haven't got that many extra I/O. However, a MCP23S17 will give you 16 programmable I/Os and you can easily fit 8 of these chips on the same SPI bus. That is 128 pins. Use an extra pin and you can have another 8 of them. There are also functions like a pin that monitors a selected number of pins and gives an output if any one changes so you only have one pin to monitor to see if anything has changed. There are other special functions in this chip as well. It is also a lot cheaper than another processor.
Being SPI it is much faster than I2C.

I made a product that uses the MCP23017 (similar to Mike's MCP23S17, except I2C) to add 64 general purpose I/O to the Arduino:

It comes at the cost of two of your analog inputs, though, since that is where the Arduino team chose to put the standard I2C pins (since they want to use the hardware I2C instead of a software implementation).

There are also some connectors and breakout boards, to easily wire up to a breadboard or to some bare wires or screw terminals.