Audio Transformer output straight into an opamp?
You don't really need the oversignal indicator as when the circuit hits it's limits you'd need to be stone deaf not to hear that as the opamps will clip. For a much better oversignal detector, build a peak-detector circuit. Like it is now the LED will hardly light up visibly for nasty overload peaks.

Indeed LED's don't like reverse voltages, even 9V could be a problem. Either connect the kathode side of the LED to -9V ) assuming the opamp can drive it's output down to about -7 V or lower) or add a diode in series with the LED so that the diode will handle the 9V reverse voltage and not the LED.