A friend of mine thought of putting guitar effects into the actual guitar body. I have a nerdkit that we can test the idea, so where would we start?

Start with google :)

First you need to decide what effects do you want to have.

Then you need to find out how those effects modify the sound wave that the guitar makes. Here seems to be a nice description of many effects.

Since you want to use a nerdkit to make those effects, you need to make sure a few things are correct, also you'll need a D/A converter (sold separately). But essentially, you'd shape the output of the pickups to appropriate levels, then input that to NerdKit's A/D converter. Then in the code, you'll have to read the A/D converter, and apply this or that effect to it. Then just output it to the D/A converter to convert digital sound back into analog, and that you can send to the amp, or whatever you use to listen to your guitar.