Yeah looks good! I was thinking of something like this actually
http://m.youtube.com/watch?v=92VIEDtQKVI
if you can get a good range of tones with the midi synthesizer then it's cool. I think it would be better to have a freestyle mode as well as a karaoke mode. Also if you can get tones for different instruments, that would be awesome. That way if someone can come up with something really good, they can play it. Anyway go ahead with what you're doing. The next step after designing would be to make a small prototype. You don't need to make many keys, just a few to test would suffice. Once you are sure the electronics side is foolproof, we can consider the physical aspect of it. Good job!
Sorry for the late inclusion ....i shud be teporting here more often...i ugree wth shravya regardong MIDI tones..guitar and piano radiest yo implenent..wr cud omplemrnt an electronix drumset tho i wud nd yo hv a look tegatding the hardware gng to it....to be honest..i gt no ptebious lnwldge regardong this so if its kool eith u shravya lme lnw ehen u free and v cn neet unoficialy nd take this forward...
Sorry for horrible typos...typd from phone with latency...lme knw if smthn mosundstud or not undstud