That's a good idea, I'm sure some people would prefer a solid aluminium mount.
You could make the LED shine out the top side of the pocket (like I think you are suggesting) but normally the magnet would be over that side when the LED activates, and the magnet may also be attached to a side plate of the machine etc so in some cases that might not be the best location. That all depends on how you position the sensor and magnet on the machine of course.
If you put the LED in the same location as my diagram you could poke it out the end of the aluminium mount and just seal it, the wires have to be sealed anayway so sealing the LED too is no big deal.