There is AC across the LED so it's probably the excessive reverse voltage that damaged it. If you want to show when the AC is being TOLD to turn on, connect the LED and a series resistor across the LED in the opto-coupler, this also isolates it from high voltages. If you want to show when the AC is ACTUALLY on, use your existing schematic but connect the LED across the DC arms of a bridge rectifier and the other components to the AC arms. If you are using a small indicator type of LED, you can make the bridge rectifier from four 1N4148 or similar, it doesn't have to be a high voltage or high current type.
Brian.