My question is, given the high rate of data transfer needed to turn on and off the right leds at the right time, would this set up have an effect of the project? If an LED has 400Hz refresh rate, will this set up manage to get that happening?
You can send video frequencies through a slipring without trouble. Maybe more if you use LVDS and the arrangement is symmetrical enough. You can get commercial sliprings for a reasonable price, from China for example.
However the operating lifetime might only be a few hundred hours for that sort of thing.
I believe the heads in VCRs used a rotary transformer for the signals and did not use sliprings at all.