I want to work on a project where you could replace a magstripe with another item which can change the data stored on it via a PIC but still be read by a magstripe reader. This means that the PIC could 'write' another value to the different tracks on a magstripe to replicate different cards. So what method could be used to do this? Would a magstripe be used?
The basic hardware behind magstripes is really the same as a tape recorder. It is divided into several tracks, and has a strobe track to sync everything up. You can buy the reader hardware, and I am aware of variants that are designed for writing. Check digikey. Make sure the reader/writer hardware you buy can read/write the track you intend.
I remember watching a presentation by Acidus on his Stripe Snoop project... but I can't remember which con it was at. He had various types of readers, but he had one constructed out of an old cassette tape head. The head was manually moved to read the multiple tracks on the card. I know this is not quite the answer you are looking for, but it may help point you in the right direction! Here are some links to DIY mag card reading, software and hardware:
Sounds like you want to build a device like John Connor's ATM card/Atari Portfolio hack from the start of Terminator 2. Try googling mag stripe card spoofer.