Does LED "luminous output" follow a continuous curve to Vf=0, i.e. follow forward current?
Yes, you could, however it would be extremely crude and unstable. LEDs age so the reading will drop with time and change with temperature. Since photodiodes are far more stable, one approach is to illuminate two photodiodes with a single LED and use feedback to stabilize the LED output so the isolated photodiode reads a more stable and predictable number. Maybe if you just want to know the difference between 120VAC and 240VAC it could be okay (with adjustment for every unit) but it would be better to use a zener diode + opto and avoid the trimpot. 

A better way these days is to use a purpose-built isolation amplifier.