LED as resistor

Sorry if this has been explored already, but can the micro not supply enough current to drive the LED directly - via a resistor? Maybe a low current (2mA) LED?

Yes, it matters. Your first schematic was the correct one. The only caveat is that the current drawn by the LED is not enough to turn on the relay (should not be a problem).

I assume your answering the question I had about the diode, and you missed the later discussion.

If I move the diode over, I'll be taking power from activating the relay coil, which I don't want to do.