Example pixel shirt here:
http://www.cs.colorado.edu/%7Ebuechley/diy/diy_tank.html
Her site has lots of stuff on it which feels pretty much state-of-the-
diy-art for this kind of thing, so is probably a good starting point
(e.g. conductive thread).
For LEDs, you can get really small surface mount ones, and i'd imagine
they are bright enough to mount behind a material rather on top of it
which might give a look better than "look at my elecronics project
glued to my tshirt.
In fact, choosing clothing with a heavyweight material/style rather
than a cheap tshirt would probably make this easier. How about a
puffer jacket/vest where each panel can light up :)
Simon