I can’t answer how important it is to terminate the last input shift register to ground. I do know that I wrote software for this CORE and I didn’t do this even though I used a Din board for my 14 push buttons. It doesn’t make sense to me but maybe others will know about the reason for grounding of the pin for Midio128.
The old Midio128 does use the display to show status changes and values sent out the Midi interface but not much else. The MIOS STUDIO is the easiest way to read and update the tables for the pins on the DIN & DOUT boards. One problem that I have found with even the V3 software is that the DOUT tables only have 2 saved parameters per pin. The first byte is for the Channel and message event. The second byte is used for the event number. It is my understanding that when the 3rd byte of the Midi message is received that if the values is >63 that the pin will be set ON and if <=63 that the pin is turned OFF. You will have to do your own experimentation to see if this is the case.
If you are going to write your own program for the PIC, you will need to know how to use the functions that are supported in the MIOS. If interested, go to http://www.ucapps.de/ then navigate to MIOS->Functions->MIOS8(for PIC) Assembly API. There you will find a large list of all functions and what parameters are passed when the function is called.
It sounds like you will be using only Note ON/OFF events so you shouldn’t have any problem with controlling the outputs. My comment about <63 relates to how Midtizer software uses CC events to control LED’s for stop control.