There are different levels of improvisation depending on how closely one relies on or paraphrases the melody. Traditional bluegrass improv tends to stay fairly close to the melody rather than relying on licks only. How does one do this?
A Structured Approach to Bluegrass Soloing:
What makes a solo sound good rather than just random noodling? That is the key question. Well, it is important to know that the ear typically does not "hear" every note in an eighth note solo line, but instead tries to pick out a quarter or half note "melody" within all those notes, if that sequence is logical, predictable AND fits with the chords. Your ear will especially focus on the notes that land on beats 1 and 3 if those notes match the chord or are part of a predictable sequence. By predictable I mean has consistent motion either up or down or repeats some sort of structured sequence of ups and downs.
So what does that all mean? Basically you can take any fiddle tune and condense it down to a half note melody. In other words you can extract two important notes per measure from the melody, especially those on beats 1 and 3, to create a skeleton. Those notes we call "target tones." From here you can simply connect those notes using scale passages in thousands of way. So yes you can have one skeleton and yet create thousands of variations that will sound like the tune yet each sound fresh to the ear. A good rule of thumb is always to approach the target tones from a scale tone just below or above. You can expand this to approach the target from a half step below, even if that note is not in the key. The rest is just small scale fragments to connect these little bits of resolution.
Now to go a little further into bluegrass specifically, what makes bluegrass different from just a traditional fiddle tune is the addition of a few extra notes. How do you put "the blues" in bluegrass? Many bluegrass musicians are mistaken in focusing too heavily on the minor blues scale derived from rock and from delta or Chicago style blues. This minor blues scale lacks a major third, and while effective, is NOT bluegrass, and can sound very cliche in a bluegrass solo. Instead bluegrass is based on a rarely discussed scale, the "major blues" scale aka the "country blues" scale. It is not coincidental that the major blues scale was extremely common to early swing music which was prevalent on the radio in the same era as the invention of bluegrass. This scale uses the basic major pentatonic scale notes, the 1,2,3,5,and 6th notes of a major scale, but then adds in the flatted 3rd as a passing or connecting tone. Typically that minor third is slid up to the major third (Eflat-E) in bluegrass licks to create that bluesy yet "majory" sound. The classic G guitar run is a microcosm of this Major blues sound. Listen to Earl Scruggs play banjo and you will hear this constantly, the flatted third slid to the third then to the root. You can and should also also add to this scale the 4th and flatted 7th (F and Bflat in key of C) as other passing tones. You can also add in the major 7th (B) as another passing or connecting tone...so you have C-D-Eflat-E-F-G-A-Bflat-B-C.
I would suggest just playing around with the first 6 notes of the major blues scale (C-D-Eflat-E-F-G) and see how many ways you can create bluesy yet major sounding licks. If you use these notes and always end with Eflat-E-C it will generally sound right. Precede it with the 4th F and this will be more bluesy. Precede it with the 5th, G, and it will be more majory. Using both G and the F will give you lots of ammunition to work with=G-F-Eflat-E-C. In descending phrases, throw in the flatted 7th (Bflat). In ascending try using the major 6th (A), which is more of a major sound.
So using these two concepts you can create endless bluegrass variations on a melody by 1) creating a skeleton half note melody of target tones then connecting them with scale lines that always resolve into the target tones from a note above or below (diatonically or chromatically) and 2) injecting the minor third and flatted seventh into those lines while utilizing the major third as well. Know also that you can often switch to the major blues scale of whatever chord you are on and not just stick to the one for the key you are in, especially if a chord lasts for whole measure.
Now think about this carefully. You are connecting half note target tones using scale phrases and always resolving into target tones from a note above or below. With the additional two notes from the major blues scale you can create all sorts of inventive, jazzy, chromatic and bluesy connecting phrases to get to your target tones.
If you also switch to the major blues scale of each chord you are on, it adds even more possibilities to connect your target tones in chromatic and bluesy ways. In a simple C-F-G7 tune, you now have not only all the notes in the C major scale but also E flat, B flat and A flat as the flatted 3rds and 7ths of each chord's major blues scale that can be used depending on the chord you are on. If you add in the major 7ths as a passing tone this gets you the F# as useful on the G7. So you are now using 11 out of the 12 notes in a chromatic scale yet it continues to sound like bluegrass as long as you keep your notes within the context of the basic country (or major) blues scale for each chord. Use both the flatted third and major third in your phrases often as a way to connect important chord tones like the root and the fifth. That latter approach is THE classic bluegrass "major blues" sound in most Earl Scruggs solos.
Here is an example of using the three major blues scales to fit the chords C-F-G7. Lets use the phrase "flatted third-third-root." For C this is Eflat-E-G. Try that phrase, but shift the notes to fit each of the chords C,F and G and see what that sounds like: Eflat-E-C-C/ Aflat-A-F-F/ Bflat-B-G-F/Eflat-E-C. Notice that the chromatic notes Eflat, A flat and Bflat are NOT in the key of C yet we can still produce a pretty nice C major progression with a tinge of bluesy-ness.
Keep in mind we are NOT trying to play the blues, but this is how you interject blues and chromaticism into bluegrass fiddle tunes to spice them up from being just plain old tradition old time dance tunes. Bluegrass is the interplay of this sort of major blues sound with more diatonic fiddle tune harmony.
Want to get even further away from the melody? Then write out the chord tones for each chord as they occur in the tune and then make up your own predictable skeleton half note melody that moves through the chords using only chord tones. A good way to create something logical is to try and create a line that moves continuously downward or upward over a number of chords. Then use the same techniques to flesh out that skeleton. A classic approach to chord changes is that the flatted 7th of a dominant 7th chord (or of a country blues scale) wants to walk down a half step to the 3rd of its resolution chord, and the 3rd of a dominant seventh wants to walk up a half step to the root of its resolution chord. See how many ways you can incorporate this into your personalized skeleton melody. Looking at G7-C, the F in G7 wants to move to the E in the C chord, the B in the G7 wants to move to the C in the C chord. That dominant 7th walking down to the 3rd of the next chord leads to a sound like this: Bflat-B-G-F/Eflat-E-C. We played a simple G major blues phrase followed by a near identical C major blues phrase. Can you hear how the flatted 7th of G (an F) wants to go to the E in the C chord? We used the flatted 3rd (E flat) in the C major blues as a sort of passing chord to add bluesy-ness to it. See how it all starts to lace together into a classic bluegrass lick? We used a G major blues scale over the G chord, a C major blues scale over the C chord and connected the two via a flatted 7-to-3rd resolution with a passing bluesy flatted 3rd between them. Now, since the C chord is the V chord of F we could extend the same concept to get from the C chord to the F chord. See if you can come up with the identical sounding lick to get that done from C major blues to F major blues connecting the flatted 7th of C (a Bflat) to the 3rd of the F (an A) and using the bluesy flatted 3rd (A flat) between those two notes. (=Eflat-E-C-Bflat/Aflat-A-F)
Finally, its key that your solo have a logical coherent skeleton and logical internal structure. The listener's ear is going to pick that out as sounding logical even if all the connecting notes are "out there," but if you noodle around with no structure, it will sound like meaningless noodling even if you are using all the "right" notes. Which leads us to a common technique the best improvisers in bluegrass use instinctively, approaching sequential target tones using a repeated pattern to create a logical, predictable and therefore "satisfying" solo. You will hear this all the time in bluegrass. What I mean is that if you have three target tones in a skeleton melody, use the exact same pattern of up and down note movement to approach each one. Its a very mathematical or "geometric" approach. The patterned thinking in math and music share a lot in common! Following is an example: Arkansas Traveler.
If you extract a skeleton melody from the high part of this tune, you get the simple, logical, predictable line A G/F# E/, which is why this is such a recognizable satisfying melody line. Now if you look at the tune melody itself it approaches each of the target tones in the skeleton with the same structured phrase=down a scale tone, down another scale tone then back up to the first tone. This melody is logical and memorable because it actually uses the same "rules" as a good solo-simple predictable skeleton melody (consistently descending in scale steps) whose notes are then connected by similarly structured connecting phrases (down a scale tone-down another scale tone-back up to the initial note).
Now try this further out chromatic variation of Arkansas Traveler using the same skeleton melody and using a different but also repeated pattern to get to each target tone=down a half step, back up a half step, then to a note a half step below the next target tone. It would be this: A G# A F# G F#G F/F# F F# D# E/. Despite the G# and D# being completely outside the key it still works and sounds inventive. It uses the exact same logic as the real melody and shares a common skeleton melody, just a different repeated pattern to connect the important notes.
That is basically what you need to create meaningful bluegrass solos that are not lick-based. But lets not fool ourselves. Bluegrass IS traditional music, so quoting your favorite musicians (licks) is a great way to spice up a solo and and is an important way to stay firmly in the tradition by honoring those who came before you. Nothing wrong with licks, they just should not dominate your solo.
So, base your solos off the skeleton melody of the tune instead, understand the major blue sound, and use canned licks sparingly. You will be well on your way to creative soloing.