1kohm too small for 3mm-LED on 9VAC?
The maximum reverse voltage on most LEDs is specified as 5V. Your 9V RMS supply has a peak voltage that is almost 13V, maybe more when the LED is not loading the supply. Some LEDs will break down with that voltage (although many will not) and that can cause excessive dissipation.

The color change you observed is indicative of extreme dissipation in the LED chip, causing the die temperature to rise to destructive levels. 

Put a diode such as a 1N4148 in series with the LED. And check the resistor value with your multimeter to make sure it is what you think it is.