I've set up two configs as you described for an off/on state. I'm not really seeing how that buys me anything beyond how it was already working though. The feedback option is still greyed out ... and when I switch fader banks, the lights don't update accordingly.
The main goal I had of getting the lights to work properly was to be able to scroll the fader group and have the lights on my Beatstep update accordingly. For example, if I mute track 3 but the first track of the bank group is one, as I scroll the group to the right one at a time, the light moves from pad 3, to 2, to 1, etc.
Guessing this isn't possible without a driver?