I never used a midi input with freestyler, but it is possible using the cue.
Make a sequence with fade in for your lights and set the channels to "fade" (green).
insert the sequence in the Cue, put the "loop" off and enable "restore values".
now when you run this sequence from cue, it should fade in. And when you stop the sequence, it should fade out. (your lights should be off to start with)