I had problems with the notification LED since Feb 1 when I got my N900.
Reboot sometimes helped sometimes not.
The problem persisted through all the OTA updates up to PR1.2

Finally I found out:
When ambient light is low when locking the screen, the LED works as it should.
When ambient light is high (outsides) when locking, the LED only blinks almost invisible or is OFF alltogether.
Very simple and 100% reproducible.

But more a bug than a feature!

(by locking I mean switching the lock slider switch on the right side of the N900)

So when you are in bright light situation, and want to lock your N900, first hide it under your coat, the use the slider...