Sorry I didn't check back here for a couple days.
> There is always a resistor in series with the LED
Sure, almost always. But there are many different voltage level, forward drop, forward current combinations for a given application. There's no guarantee, even with a ballast resistor, that the a shorted LED won't result in an effective short to the power rail (not a real short, but drawing close to the power supply's current sourcing limit). A resistor with a shorted LED results in a useless current sink, in any case.
> But how often have you seen these tiny LEDs fail...I have never ever seen it happen.
What you've seen or not seen has very little bearing on the reality that parts fail. Period. Things should be designed in a cost effective way that minimizes the possibility/effects of failures. FWIW, I had a laptop recently that had a dead LED on the front panel :-/
> There is always a resistor in series with the LED
I just meant that if your "power rail" is actually just a signal line (or whatever) for some other purpose, and the led is there to indicate activity, then even in "low" signal states where the LED isn't fully conducting yet there is a small leakage current.