Can I use pin as both an ICSP pin and as pwm output?
Drive the LED thru a buffer so as not to load down the ICSP drive of the Programmer.
Simple transistor, or perhaps a logic gate such as 74AC14, with +/- 24mA drive current.
Or 74AC125 if you want to have an output enable you can control from the uC. Pull it high with a resistor to keep the outputs off while the uC is being reprogrammed (assuming its other outputs go to INPUT state when Reset line is taken Low by the Programmer).
https://www.digikey.com/product-detail/en/on-semiconductor/MC74AC125DR2G/MC74AC125DR2GOSCT-ND/3462317

https://www.digikey.com/product-detail/en/texas-instruments/SN74AC14N/296-4301-5-ND/375819