Here's a quick diagram showing how our MIDI bass fret system works.
We've already removed the fingerboard off our bass guitar, and plan to replace it entirely with home-made circuit boards (each section between two frets is a separate PCB).
The pcbs are fixed to the guitar neck, screwed down on top of some sections of rubber padding. This serves two purposes. The first thing it does is create a "pocket" for the surface-mount electronics on the PCB to comfortably fit without getting damaged. Secondly, it pushes back against the board mounted upon it.
This allows us to use copper table, placed over the fret (each fret is a piece of laser-cut acrylic) to create a single, continuous circuit up the entire length of the neck.
For each guitar string, the circuit is simply a resistor and LED, so each PCB has four resistors and four LEDs (one for each string)