So far, with about half of my parts in hand I have created the digital out circuit based on the Arduino and written the code for the guitar hero bot. The song files look like:

# this is a comment
# below is the time increment the following lines are listed in 
I 300
01 G_Y_O_
05 _R_B__
01 GR___S
01 _RY_O_
01 G_Y_O_
I 1000
# the increments can be specified anywhere (song speeds up or slows down)
05 _R_B__
01 G___O_
01 GRY___

The notes are held until the next note comes along. It's ugly, but lifting them isn't necessary in the game.
The code is in Python 2.5 and will be released in a package at the end of the project.