Hey,
First off, I won't say I hate LEDs, per se. However, I wouldn't say it's something I'd put in my machines. I have a Pin*Bot that had some LEDs in it when I got it, I never thought it looked bad, but when I swap the playfield, I'll probably go back to the standard ones just for the sake of keeping things on par with my other machines. So, with that out of the way:
Go look at this: http://en.wikipedia.org/wiki/Denn%C5%8D_Senshi_Porygon
I have played a couple of games with LEDs in darker locations (bar setting), and this was all I could think of when it happened. No, I didn't have a seizure or anything to that effect, but yes, the flashing did bother me. I've never had something like that happen before or since. So, the first part would be the instantaneous on/off, which actually bothers me in a physical sense.
Keeping with the list, price would factor into it as well; for the cost of converting my TSPP, Shadow, and WhiteWater to LEDs, I could probably buy a half-decent solid-state machine. It's kind of like when a kid buzzes by in his Honda CRX with a resonator muffler. I think to myself, "Why would you pay that kind of money to have your car sounds that bad?" And when I see some machines, I just think, "Too much, man. Too much." Have a spot on the playfield that's generally dark and you can put an LED in there, brighten it up, and improve gameplay? Awesome. Have a spot in your house that looks like you're running a grow-op, but it's actually your Spirit of '76? Not so awesome. There's something to be said for subtlety.
Luke