There has been some concern over leaving your Matrix in mode 4 in that M$ could theoretically re-flash your chip's bios from a game or via Xbox Live.
This is just speculation, and no one knows for sure, but you just never know what could happen. (Who could have predicted the XboxLive dashboard update?)
If something like this did happen, you would just have to take out your chip and re-flash it with the programmer.
You could wire up external switches, like a few of us are doing, so that you can change modes without opening up your 'Box every time.
As far as the LED getting burnt out or ruined, I am not entirely sure, but you would think that it would eventually wear out from it constantly flashing.
My PS2 constantly flashes blue when in DVDr boot mode, and it has never worn out, so who knows?