A small led indicator somewhere on the front of the device looks so corny. I think a nice way is to use the white square in the homebutton to lighten up when you have a notification.
I used to have the Camera LED flash for text messages with BiteSMS and it got kind of annoying after a while. I would much prefer a glowing home button or something a little more subtle which seems to suit Apple's style. There was a couple of times in the middle of the night where my bedroom looked like a rave was taking place, not fun when you are trying to catch some Zzz's haha!
Or you can just push the home button to see if you've gotten an email. No LED needed.
If it does, it's probably gonna be embedded into the home button. Like an LED ring around it...at least, I hope.
Probably, however I'm not sure.
I would prefer the home button square to pulse (like the MacBook Pro in sleep mode) rather than a ring around the home button. IMO the ring around the home button would look tacky.