I believe that's part of the notification bar. I don't remember seeing where that can be turned off. Check back in a little bit, I may have an answer for you.
I want to produce an app to control the LED, but since I have never programmed for the Droid, someone else would probably have to produce said app for me.
Anyways, how about an app that allows you to see some sort of SOS readout from the LED. A green blinking light does not tell me a whole lot. How about a slow single blinking green telling me I have a text. A purple telling me I have a Yahoo mail message. A red telling me I have a Google mail message. Now if either one of those produces more than one message, the light blinks the amount of times representing the amount of messages for that given alert. I look down and see a green flash, three purple flashes, and two red flashes, and I know that I have 1 text, 3 Yahoo messages, and 2 Gmail messages.
The lights would blink fast, as to repeat the cycle rapidly.
You can't turn off any LED. You can download an app and change the color of the LED to white. Since they don't blink white it just won't blink at all. Alternatives FTW.