The LEDs will be mounted in foamboard (or posterboard) just inside the back panel. If you're using a purchased shadowbox, it will come with a panel for mounting the display items (probably covered in cloth). Remove that panel and cut a piece of foamboard to replace it.
In my shadowbox, the Arduino is too big to stuff between the foamboard and the back panel, but it'll fit nicely along the side. So I cut a hole in the foamboard for it.
The Arduino has some onboard LEDs of the boring non-RGB variety, which don't really fit with the theme of the project. Worse, some of its components are shiny and will reflect the other LEDs. So to hide it from view, I created a little "tent" out of some extra foamboard and glued it in place.
Use a calculator to determine the spacing you need and draw out the grid. For 25 pixels, you'll need 7 lines horizontally and vertically. The LEDs will go on every other intersection.
Mark the points you're going to cut, otherwise you'll cut the wrong place when you're almost done. Having to start over will reduce your enthusiasm. (Trust me.)
Cut the holes with your razor knife. I found it was easiest to cut square holes with the knife, then round them out by using a 0.5" drill bit as a hand tool (not in the drill).