Check out my LED clock when uploading from arduino v1.0.1 and not updating with the INPUT_PULLUP change… I now need to hack in a microphone so it will actually dance in time with the music 
Also check out the msgeq7 chip - 7 band spectrum analyzer :).
i got my audio reacting light clock to work with just a mic preamp and using an FFT lib on board which works ok and is fast enough for several bands (16 i think?). mine uses a pro mini so should work on any equivalent arduino using that method. i seem to have completely neglected to document the project after making a rubbish video when i’d only just got it going but here you go for a not very good example: http://www.youtube.com/watch?v=N3zRRhIrUHw (must get round to videoing in it’s current form!)
Hi Mike, Daniel & Pete. Thanks for your input. Pete have you published your code & circuit diagrams anywhere?
no but i just looked it up and i used this library: http://wiki.openmusiclabs.com/wiki/ArduinoFHT which was the major breakthrough in making this fast enough yet without extra circuitry. for that which i did use it was a case of hooking up the lights and a clock chip module to the arduino and then a mic preamp and mic breakout to one of the analogue inputs - all pretty much the basic tutorial level for each except combined! here’s a vid i did of the newer one with better useage of the spectrum data: http://www.youtube.com/watch?v=cmzteDzHv9U - i also managed to make it less tragically potato shaped!
The ArduinoFHT looks ideal. I can’t wait to implement it. I promised myself I would pause coding on my project until I have created supporting material, like circuit diagrams etc. But as soon as I have, I will get on it… Meanwhile I will get the components ordered. 
good Job, I definetly would want one, even without the Music reaction it just Looks awesome!