Not enough forward voltage on a scanning matrix.
Blue LEDs are
so 2009.

In theory you are right — a LED has too much drop to stay inside the receiver's voltage thresholds. In practice, a 2V red LED will probably work with a typical 5V CMOS controller ("probably" means "not my problem"). For CMOS with TTL-compatible inputs, anything but blue and white would probably work (the matrix must drive high or else plain old dark diodes wouldn't work either).
Also in practice, it's a pretty pointless exercise, since the LED only illuminates when the key is pressed, and the duty cycle is low. But I said that already.