2 LEDs for a mixer, one for signal monitor and another for mute status
Turn the switch around!
make the common terminal go to ground, the mute position connect the end of R55 to ground, and the remaining terminal short out the red led (or use an NPN transistor if sinking the current is undesirable)....



simulate this circuit &ndash; Schematic created using CircuitLab
You will want to refine it a bit, as any DC on the output of the opamp will produce switching clicks.
Your level detector also has a problem in that the 1k base resistor will only draw current on a positive going signal, where it looks like 1k in series with a diode, but when not conducting that chain looks like an open circuit. Your source impedance is 1k, so that produces pretty horrible distortion.