Oh, that'd be a diode, for nkey rollover. You can replace it with an LED, and it'd still work, but I don't think they carry enough current to light it up. In your case, you'd have to desolder the switch, and especially the diode, add the LED, and wire it to a power source. You can tap into the PS2 power, and have a current limiting resistor for the LED's.
For a 2.6V LED (blue, I think) that you want to be 5 mA of current (from a 5V power supply), you'd need a 560 ohm 1/8W resistor.
Edit: I'll put more info here later, once I think of useful things to consider.