Your LED will always be lit, those power connections always have power when a battery is connected or when external (USB) power is supplied. Unless I missed it, there is still no way to see if the camera is recording because the front LED does not come out to the back of the camera (or we haven't found it yet).
One thing you can do is get a small LCD and use the live video with overlay, pretty sure this tells you if you are recording or not.
Also the switch you need is called normally open, also often shown as off-(on) on the electric component sites. The (on) means it is momentary as opposed to just plain on which means it will remain in that state. For rocker switches you can often go with an on-(on) or off-(on) or sometimes shown as on-none-(on) and just find the two terminals that get connected for the momentary contact.
I think you need to pull another pin low to make the audio input work, but I haven't looked at the information presented earlier long enough to tell you with any certainty.
All this stuff is on my list when I get time to make some cables and do some testing.

