I just got CM7 yesterday and had the same problem.
Go to Settings>CyanogenMod settings>Interface>LED Notifications>Unconfigured
You can then change the specific apps that you want the LED notifications to turn blink green for. The rest should be straight forward. Play around with it to test it, I think had to change the LED mode option to "Force LED on" to get it to work.
Hope that helps. Also I found that with CM7 when you're charging, the LED light turns green once the battery hits 90% and sometimes flashes.