Another route to take would be to use multiplexers. They allow you to address many outputs (or inputs) with few arduino pins.
A setup similar to the one on the left would allow nesting of multiplexers to enable control of more LEDs. The only issue you would run into is that the LEDs may dim a little bit between being addressed.
Here's an Arduino page on the topic (with sample code). http://www.arduino.cc/playground/Learning/4051
/*
* codeexample for useing a 4051 * analog multiplexer / demultiplexer
* by david c. and tomek n.* for k3 / malm� h�gskola
*
* edited by Ross R.
*/
int r0 = 0; //value of select pin at the 4051 (s0)
int r1 = 0; //value of select pin at the 4051 (s1)
int r2 = 0; //value of select pin at the 4051 (s2)
int count = 0; //which y pin we are selecting
void setup(){
pinMode(2, OUTPUT); // s0
pinMode(3, OUTPUT); // s1
pinMode(4, OUTPUT); // s2
}
void loop () {
for (count=0; count<=7; count++) {
// select the bit
r0 = bitRead(count,0); // use this with arduino 0013 (and newer versions)
r1 = bitRead(count,1); // use this with arduino 0013 (and newer versions)
r2 = bitRead(count,2); // use this with arduino 0013 (and newer versions)
//r0 = count & 0x01; // old version of setting the bits
//r1 = (count>>1) & 0x01; // old version of setting the bits
//r2 = (count>>2) & 0x01; // old version of setting the bits
digitalWrite(2, r0);
digitalWrite(3, r1);
digitalWrite(4, r2);
//Either read or write the multiplexed pin here
}
}
Take a look at something like this: http://www.arduino.cc/playground/Learning/4051