Hello icetea, that LED is normal and it is so that you can find the output jack easier. Its actually a nice feature unless you don't have anything plugged in and it is pointing in your direction at night.
Just found this info from this link.
Regret to inform you that Dan_Intel is misinformed. This is not his fault; the Technical Specifications document (3rd revision) does not have complete information on the audio capabilities of this board.
In fact, the DQ77KB does support S/PDIF audio output. The green speaker jack on the back of the board is a dual-function jack. In addition to serving as a 1/8-inch stereo analog audio jack, it is ALSO a Mini-TOSLINK plug.
You can see this for yourself by installing the latest Realtek Audio driver from Intel's website, selecting "Realtek Digital Audio" as your default playback device, and observing the red glow coming from this jack.
You will need a Mini-TOSLINK to normal TOSLINK adapter plug (these cost only a few dollars at Amazon or Fry's), or an optical audio cable that has a mini plug on one end and a normal plug on the other. Of course, you will also need an audio or home theater receiver that supports optical inputs.
I have verified that the S/PDIF output on the DQ77KB can produce 2-channel PCM and 5-channel Dolby Digital and DTS at 44.1, 48, and 96 kHz, with either 16- or 24-bit resolution. My Denon receiver does not support 192 kHz samples, so I haven't verified that.
As you probably know, S/PDIF does not support the newer Blu-Ray audio formats like Dolby HD, nor does it support more than 2 channels of PCM. This is a limitation of S/PDIF itself, not the board.
If it's the same as other dual-function jacks then the LED should go out when you plug in a standard analog audio jack such as the one that comes on most desktop speakers.
I'm running the board as a headless server so i don't have any speakers plugged in.
It doesn't bother me now i know what it is as i was only concerned it was some error light reflecting from the board.