I think the LED lost out because then it would look all too much like the Borg.
This isn't just so others can know when your device is recording them, it's for you to know when your own device is recording you.
Of course, it can still be hacked. http://arstechnica.com/security/2013/12/perv-utopia-light-on...
Hidden cameras exist, but there is very little reason to use one in everyday. But giving every single person a thing they have constantly that does this functionality is a real change. The linked article mentions how cameras were banned, but I still dislike cameras and if I see people with one in public taking photos I will avoid them. If those cameras were always out and always pointing at people I would feel very uneasy.
That's the big difference between designing a light for the owner's protection (who probably won't disable the light and will notice if it breaks) versus a light for the protection of others (who might not know to look for a light in the first place, especially once Glass evolves to look like regular glasses).
There's a laptop accessory market for physically blocking camera switches with state determined at glance. Wearable cameras may need to adopt a similar mechanical approach for today's social expectations, but putting switches on your face is somewhat at odds with designing away from the Glasshole Borg look.
I watched a googled give a talk (on privacy) with his google glass on, the display lit up about 20 different times throughout his talk.
But I imagine there would be a very strong correlation between those who wear Google Glass and those are technically astute. Which then leads you to think they would put that video on the internet somewhere.
A lot of people don't wan't their drunken, embarrassing moments on the internet. It can affect relationships, career, etc.